MexECON Blog

August Trade Balance Swings Back to Deficit

Mexico's August merchandise trade balance showed a seasonally-adjusted deficit of $595.8 million, after a revised surplus of $375.4 million in July.  Prior to that, the trade balance had been in deficit for four straight months.  According to the report, the value of Mexican exports fell to $33.518 billion in August, down 1.0% from the record high in July.  Exports of autos and auto parts rose in August, but exports of agricultural, mineral, and non-auto manufactured goods all declined.  Meanwhile, the value of Mexican imports jumped to $34.114 billion in August, rising 1.9% from July and erasing the two prior months of declines.  On an unadjusted basis, Mexican exports in August were up 2.1% from the same month one year earlier, while imports were up 4.8%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in August, they were up 4.4% year-over-year.  The major manufactured goods showing the biggest increases were autos and auto parts, industrial machinery and equipment, and scientific and professional equipment.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 10.6% year-over-year in August.  Within this category, the volume of Mexican crude oil exports averaged 1.114 million barrels per day, down 3.7% from August 2013.  The average export price for Mexican crude was $92.58 per barrel, down 8.2% from one year earlier.  Finally, Mexican agriculture exports in August were up 7.0% year-over-year.  Among the agricultural exports posting the best performances, cattle exports were up 97.8%, avocado exports were up 46.8%, and citrus exports were up 18.7%.

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

Comment: Mexico's trade picture remains positive, in spite of the return to deficit during August.  With the recent rebound in the U.S. economy, Mexican exports have been trending higher, and if U.S. demand continues to strengthen as many observers expect, exports will probably reverse their August pullback and then keep rising in the coming months.  The recent weakness in the peso will help make Mexican products more price competitive, giving them a further boost on world markets.  It is true that Mexico relies heavily on foreign countries for its capital equipment, raw materials, parts, subassemblies, and other intermediate goods, and that reliance will tend to boost the country's imports.  Nevertheless, the rise in exports will help spur increased manufacturing and industrial activity in Mexico.  Overall economic growth is therefore likely to remain stronger than it was in 2013, though continued weakness in consumer spending will probably limit the improvement.

Patrick Fearon, CFA
Vice President, Fund Management

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