MexECON Blog

Exports Continue to Stabilize

Mexico's March merchandise trade deficit widened to a seasonally-adjusted $577.3 million, after a revised deficit of $200.5 million in January.  However, exports as measured in dollars continued to stabilize.  The value of Mexican exports edged up 0.2% to $31.955 billion in March, after a revised 0.3% gain in the previous month.  The increase during March came mostly from a strong rebound in foreign sales of autos and auto parts, which were more than enough to offset softer exports of mineral products and non-auto manufactured goods.  Meanwhile, March imports jumped 1.3%, reversing part of their decline in the previous month and reaching $32.532 billion.  On an unadjusted basis, Mexican exports in March were up 2.7% from the same month one year earlier, while imports were up 4.3%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in March, they up a strong 8.8% year-over-year.  The major manufactured goods showing the biggest increases were autos and auto parts, professional and scientific equipment, and electronics and electrical goods.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 44.3% year-over-year in March.  Within this category, the volume of crude oil exports averaged 1.212 million barrels per day, up 7.0% from March 2014.  However, the average export price for Mexican crude was just $45.97 per barrel, down 50.7%.  Finally, Mexican agriculture exports in March were up a strong 17.4% year-over-year.  Among the agriculture exports posting the best performances, cattle exports were up 88.0%, frozen shrimp exports were up 53.7%, and avocado exports were up 38.1%.

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

Comment:  Measured in pesos, Mexican exports have been rising rapidly.  However, that mostly reflects the fact that the peso has weakened dramatically in recent months.  Each dollar of exports now buys approximately 15.35 pesos, versus about 13.30 pesos one year ago.  The low value of the peso should make Mexican goods more price competitive and promote stronger foreign sales, especially now that the labor market has strengthened in the United States, the country's key export market.  In reality, Mexican exports as measured in dollars have pulled back since last autumn.  One problem is that even though more U.S. consumers are finding work, they continue to focus on controlling their debt, which has held down the demand for Mexican consumer goods.  Just as important, U.S. industrial firms have been facing a range of challenges, including a strong dollar that has impeded exports, low oil prices that have reduced investment in the energy sector, and a surge in excess inventories.  The strength in Mexican exports as measured in pesos is probably enough to help buoy the economy, but the stabilization in exports as measured in dollars is still an important sign.  If it means that U.S. demand is again ready to accelerate, the economic impetus will be even stronger, and Mexican economic growth could strengthen beyond its current moderate rate.

Patrick Fearon, CFA
Portfolio Manager

Trade Balance 1503Exports 1503

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