Itaú BBA - MEXICO – Strong improvement in August trade balance

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MEXICO – Strong improvement in August trade balance

September 28, 2020

The manufacturing sector is driving the economic recovery

The trade surplus improved further in August. The monthly trade balance posted a surplus of USD 6.1 billion in August, below our forecast of a surplus of USD 7.9 billion but above median market expectations (USD 5.0 billion surplus, as per Bloomberg) – taking the 12-month rolling trade balance to a surplus of USD 17.6 billion in August (from a surplus of USD 11.9 billion in July). The improvement in the 12-month trade balance was driven by both the non-energy and energy balance, which stood at USD 33.8 billion in August (from USD 29.3 billion in July) and USD -16.2 billion (from USD -17.4 billion), respectively. At the margin, using 3-month annualized seasonally adjusted figures, the trade balance stood at a surplus of USD 70.7 billion in August (from a surplus of USD 28.4 billion in July), with the energy trade balance posting a deficit of USD 7.6 billion (from a deficit of USD 6.9 billion), while the non-energy trade balance improved to a surplus of USD 78.3 billion (from a surplus of USD 32.3 billion).

Manufacturing exports expansion continued in August, supported by a recovery in U.S. economic activity. Using seasonally adjusted figures, manufacturing exports grew 4.0% month-over-month in August (from 39.3% in July), taking the quarter-over-quarter annualized growth rate (qoq/saar) to 237.9% in August. Within manufacturing exports, non-auto sales expanded at a faster pace in August (5.5% month-over-month), while auto exports grew 1.4%. Still, manufacturing exports are 8.3% below a year ago, also using seasonally adjusted figures. 

Non-oil imports recovery is driven mainly by intermediate goods (consistent with the recovery of external demand). Non-oil imports expanded 6.3% month-over-month in August (from 2.7% in July), taking the qoq/saar to 15.2% in August.  The recovery in non-oil imports is driven mainly by intermediate good (a qoq/saar rate of 21.7% in August, from -58.4% in July), while consumption (-20.9%, from -63.9%) and capital (6.8%, from -36.4%) goods, associated to internal demand, are recovering at a softer pace. 
We expect external accounts to improve in 2020 relative to 2019. 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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