Itaú BBA - MEXICO – Further improvement in October’s trade balance

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MEXICO – Further improvement in October’s trade balance

November 27, 2020

Manufacturing exports surpassed pre-outbreak levels

Further improvement in the trade balance in October. The monthly trade balance posted a surplus of USD 6.2 billion in October, above our forecast of USD 5.0 billion and median market expectations of USD 3.3 billion (as per Bloomberg) – taking the 12-month rolling trade balance to a surplus of USD 29.1 billion in October (from USD 22.2 billion in September). The improvement in the 12-month trade balance was driven by the non-energy balance which stood at surplus of USD 43.9 billion in October (from USD 37.8 billion in September), while the non-energy balance stood broadly stable at a deficit of USD 14.8 billion (from a deficit of USD 15.6 billion). At the margin, using 3-month annualized seasonally adjusted figures, the trade balance stood at a surplus of USD 73.4 billion in October (from a surplus of USD 74.7 billion in 3Q20), with the energy trade deficit at USD 11.8 billion (from a deficit of USD 10.4 billion), while the non-energy balance stood at a surplus of USD 85.2 billion (from a surplus of USD 85.1 billion).


Manufacturing exports surpassed pre-outbreak levels. Using seasonally adjusted figures, manufacturing exports accelerated in October (4.8% month-over-month, from 1.3% in September), taking the quarter-over-quarter annualized growth rate (qoq/saar) to 235.7% in October. Within manufacturing exports, auto sales (9.6% month-over month in October, from -0.5% in September) drove the expansion, while non-auto sales stood at 2.2% (from 2.3%). We note manufacturing exports are now 2.9% above pre-outbreak levels (February), also using seasonally adjusted figures.

External demand recovery is also reflected in the expansion of imports of intermediate goods, the main driver of non-oil imports.  Non-oil imports expanded 1.2% month-over-month in October (from 5.9% in September), but it was driven by intermediate imports (1.9%, from 6.4%), while consumption (-2.7%, from 6.1%) and capital (-1.2%, from 1.5%) goods imports, associated to the internal demand, deteriorated.  The qoq/saar of total non-oil imports stood at 115.6% in October, with its level remaining 8.6% below pre-pandemic levels.

The trade balance is set to improve sharply this year. Manufacturing exports are recovering at a faster pace than non-oil imports due to a better performance of domestic demand in the U.S. relative to Mexico (domestic demand recovery will be curbed by a modest fiscal stimulus and prevailing uncertainties over economic policy direction) and the weaker peso.

Julio Ruiz

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