MexECON Blog

Exports Fall Sharply in January

Mexico's January merchandise trade deficit widened to a seasonally-adjusted $1.781 billion, after a revised deficit of just $105.2 million in December.  According to the report, the value of Mexican exports fell to $31.883 billion in the first month of the year, down 3.7% from the previous month.  The decline came primarily from a sharp decrease in non-auto manufactured goods.  Meanwhile, January imports rose to $33.664 billion, up 1.4% from December, mostly on a rise in capital goods imports.  On an unadjusted basis, Mexican exports in January were down 1.8% from the same month one year earlier, while imports were down 1.4%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in January, they were up 5.6% year-over-year.  The major manufactured goods showing the biggest increases were autos and auto parts, steel, chemicals, and electronics and electrical goods.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 47.3% year-over-year.  Within this category, the volume of crude oil exports averaged 1.261 million barrels per day, up 7.7% from January 2014.  However, the average export price for Mexican crude was just $40.15, down 55.7% from one year earlier.  Finally, Mexican agriculture exports in January were up 15.0% year-over-year.  Among the agriculture exports posting the best performances, frozen shrimp exports were up 72.2%, cattle exports were up 50.1%, and fruit exports were up 48.4%.  Among the agriculture exports posting the worst performances, chickpea exports were down 39.8% year-over-year, and cucumber exports were down 12.3%.

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

Comment:  Measured in dollars, Mexican exports have softened in recent months.  In part, that reflects an ongoing slide in Mexican oil production and continued weakness in global oil prices.  However, it also reflects a big pullback in non-auto manufactured exports.  That's consistent with the weakness in U.S. durable goods orders at the end of 2014, which probably stemmed mostly from U.S. companies' caution in the face of the strong dollar, slow economic growth in Europe and Asia, and their own rising inventories.  The drop in oil prices has also weighed on drilling activity and curtailed the demand for capital goods related to the energy industry.  Nevertheless, there are several reasons to expect Mexican exports to strengthen again in the coming months.  Most important, overall demand in the United States continues to improve.  A report today showed U.S. durable goods orders rebounded somewhat in January, and rising employment and falling energy prices have encouraged stronger consumer spending.  The weakness in the peso also should be a positive for Mexican exports going forward.  In fact, Mexican exports as measured in pesos are clearly trending upward at a good pace.  In sum, the recent softening in international trade does not yet appear to be a major threat to the Mexican economy.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1501

Exports 1501

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