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MEXICO – Trade deficit deteriorated in 2018

January 28, 2019

At the margin, manufacturing exports weakened

Trade deficit deteriorated in 2018, dragged by the energy deficit.  Monthly trade balance posted a USD 1.8 billion surplus in December, above median market expectations (USD 0.9 billion deficit, as per Bloomberg) - with a 2018 trade deficit of USD 13.7 billion (from a 12-month rolling deficit of USD 15.5 billion in November and USD 11.9 billion in 2017). Looking at the breakdown, energy deficit posted a USD 23.2 billion in 2018 (from a 12-month rolling deficit of USD 23.1 billion in November and USD 18.3 Billion in 2017), while non-energy surplus posted USD 9.5 Billion (from 12-month rolling surplus of USD 7.5 billion in November and USD 7.3 Billion in 2017). At the margin, the trade deficit also deteriorated, as the seasonally-adjusted 3-month annualized measure came in at USD 15.6 billion in the 4Q18 (from USD 13.5 billion deficit in the 3Q18), with the energy deficit at USD 25.9 billion (from a deficit of USD 24.7 billion) and the non-energy surplus at USD 10.4 billion (from USD 11.2 billion).

At the margin, manufacturing exports weakened, reflecting some deceleration in the US manufacturing sector.  Using seasonally adjusted figures, total exports decreased 3.3% quarter-over-quarter annualized growth (qoq/saar) in 4Q18 (from 10.2% qoq/saar in the 3Q18). Looking at the breakdown, manufacturing exports decreased 0.1% qoq/saar in the 4Q18 (from 13.3% in the 3Q18). Within manufacturing exports, auto exports decreased 4.5% qoq/saar in the 4Q18 (from 31.5% in the 3Q18), while non-auto exports decelerated to 2.5% qoq/saar in the 4Q18 (from 4.3% in the 3Q18).

At the margin, imports also decelerated, dragged by non-oil imports, potentially reflecting a deceleration of internal demand. Imports decreased 1.5% qoq/saar in the 4Q18 (from 8.1% in the 3Q18), with non-oil imports decreasing 0.4% qoq/saar (from 8.8% in the 3Q18). Within non-oil imports, consumer goods (-4.3% qoq/saar in the 4Q18, from -2.9% in the 3Q18), intermediate goods (2.5% qoq/saar in the 4Q18, from 10.1% in the 3Q18) and capital goods (-15.5% qoq/saar in the 4Q18, from 11.6% in the 3Q18) weakened.

We expect the current account deficit to remain broadly stable relative to 2018 at a narrow level (1.5% of GDP). On one hand, US economic slowdown will curb manufacturing exports, while weak oil production is a downside risk for the energy balance. However, uncertainty over domestic policies and over the USMCA approval in US Congress will likely slow internal demand.


Julio Ruiz



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