MexECON Blog

July Trade Balance Swings to Surplus

Mexico's July merchandise trade balance swung to a seasonally-adjusted surplus of $400.4 million, after revised deficits of $323.7 million in June and $520.9 million in May.  It was the first surplus since February.  According to the report, the value of Mexican exports rose to a record $33.868 billion in July, reflecting increases in a broad array of manufactured exports.  Exports in July were up 1.6% from the previous month, after a flat performance in June.  The value of Mexican imports fell to $33.467 billion in July, marking the second straight month in which imports fell 0.6%.  On an unadjusted basis, Mexican exports in July were up 4.5% from the same month one year earlier, while imports were up just 3.1%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in July, they were up 7.6% year-over-year.  The major manufactured goods showing the biggest increases were professional and scientific equipment, autos and auto parts, and rubber and plastics.  Exports of autos and auto parts alone were up 14.6% year-over-year.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 19.4% year-over-year in July.  Within this category, the volume of Mexican crude oil exports averaged just 1.02 million barrels per day, down 15.7% from July 2013.  The average export price for Mexican crude was $95.97 per barrel, down 5.0% from one year earlier.  Finally, Mexican agriculture exports in July were up a strong 15.9% year-over-year.  Among the agricultural exports posting the best performances, cattle exports were up 129.3%, fish and shellfish exports were up 41.1%, and chickpea exports were up 36.7%.

The report was released today by INEGI, the official statistics agency.

Comment:  Mexican exports continue to strengthen, as they have been doing since early this year.  The reacceleration mostly reflects improving demand from the United States.  If U.S. demand continues to rise as most observers expect, exports are likely to solidify further.  At the same time, recent reports suggest the Mexican construction sector is finally rebounding from a long period of extreme weakness.  The main question mark for Mexico remains the consumer sector.  Consumption spending apparently accounted for most of the acceleration in Mexican economic growth in the second quarter, but that was largely just a natural rebound after new sales taxes took the wind out of consumer spending in the first quarter.  Mexico's labor market remains relatively soft, and that could limit the gains in consumer demand going forward.  In spite of the ongoing rebound in exports and construction, it is therefore unclear how much further the overall Mexican economy can strengthen in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1407

Exports 1407

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