MexECON Blog

May Exports Decline

Mexico's May merchandise trade deficit widened to a seasonally-adjusted $1.803 billion, after revised deficits of $1.264 billion in April and $0.628 billion in March.  According to the report, Mexican exports dropped 4.7% to $30.886 billion in May, easily erasing their 1.6% gain in April and posting their worst monthly decrease since December 2008.  The fall in May came as increased petroleum and agricultural exports were more than offset by big declines in a range of other categories, including minerals, autos and auto parts, and, most significantly, non-auto manufactured goods.  Imports also declined in May, falling 3.0% to $32.689 billion, but that came after a 3.5% jump in the previous month.  On an unadjusted basis, Mexican exports in May were down a sharp 8.8% from the same month one year earlier, while imports were down 5.5%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in May, they were down 5.2% year-over-year.  The major manufactured exports showing the biggest declines were steel, industrial equipment, and chemicals.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 37.2% year-over-year in May.  Within this category, the volume of crude oil exports averaged 1.114 million barrels per day, down just 0.2% from May 2014.  However, the average export price for Mexican crude was $55.30 per barrel, down 42.9%.  Finally, Mexican agriculture exports in May were up 4.9% year-over-year.  Among the agriculture exports posting the best performances, cattle exports were up 70.0%, melon exports were up 45.8%, and mango exports were up 33.5%.  Among the agriculture exports posting the worst performances, grape exports were down 16.4%, and frozen fish and shellfish exports were down 40.6%.

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

Comment:  Mexican exports as measured in dollars continue to soften, reflecting the general slowdown in North America's manufacturing sector.  The key problem is that U.S. factories are struggling with a strong dollar, weak economic growth in Europe and Asia, and falling investment in the domestic energy sector.  U.S. manufacturers are therefore importing fewer inputs, such as steel and chemicals.  A jump in Mexican exports in April had raised hopes that the tide was turning, but now it looks like the headwinds will continue for a while longer.  Nevertheless, other recent data from around the globe holds out hope that these problems could reverse in a few months.  I am especially encouraged by signs of renewed growth in Europe and the continued strengthening in U.S. employment, consumer confidence, and consumption spending.  There are still big risks, such as a Greek default and exit from the Eurozone and a potentially destabilizing rise in U.S. interest rates later this summer, but I suspect that the Mexican economy will weather the slowdown in exports and keep growing modestly.

Patrick Fearon, CFA
Portfolio Manager

Trade Balance 1505

Exports 1505

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