Itaú BBA - MEXICO – Trade deficit narrowed between December and January, with both exports and imports improvin

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MEXICO – Trade deficit narrowed between December and January, with both exports and imports improvin

February 27, 2019

At the margin, manufacturing exports and non-oil imports improved somewhat

Trade deficit improved at the margin. Monthly trade balance posted a USD 4.8 billion deficit in January, below median market expectations (USD 3.9 billion deficit, as per Bloomberg) – taking the 12-month rolling deficit to USD 14.1 billion (from a deficit of USD 13.7 billion in December). Looking at the breakdown, also using 12-month rolling figures, energy balance deteriorated slightly (associated to the fall in oil output), posting a deficit of USD 23.7 billion in January (from a deficit of USD 23.2 billion in December), while non-energy balance improved somewhat, posting a surplus of USD 9.6 Billion (from a surplus of USD 9.5 billion). At the margin, the trade deficit improved, as the seasonally-adjusted 3-month annualized measure came in at USD 14.9 billion in t he Janua ry (from USD 16.2 billion deficit in December), with the energy deficit at USD 24.2 billion (from a deficit of USD 25.9 billion) and the non-energy surplus at USD 9.4 billion (from USD 9.7 billion).

At the margin, manufacturing exports improved in January, supported by non-auto exports (offsetting a decline in auto exports). Using seasonally adjusted figures, total exports grew 1% month-over-month in January (from 1.6% in December). Looking at the breakdown, manufacturing exports improved in January, growing 1.7% month-over-month (from 1% in December), despite auto exports decreasing 3.3% (from 2.4%), while non-auto exports accelerated to 4.5% (from 0.1%). Labor strikes, that started the second week of January, in some manufacturing firms in the northern city of Matamoros (state of Tamaulipas) doesn’t seem to be affecting importantly manufacturing exports. Using quarter-over-quarter annualized growth (qoq/saar) figures, in January, total exports still fell by 4.8% (from -3.3% in Dec ember), with manufacturing exports falling 2.0% (from -0.02% in December). Within manufacturing exports, auto exports fell 14.4% qoq/saar (from -6.5% December), while non-auto exports improved to 5.7% qoq/saar (from 3.8%).

At the margin, imports (including non-oil imports) also improved in January.  Using seasonally adjusted figures, total imports grew 4.1% month-over-month in January (from -5.2% in December), with non-oil imports improving to 4.5% (from -3.7%). Using quarter-over-quarter annualized growth (qoq/saar) figures, total imports decreased 3.3% (from -1% in December). Looking at the breakdown, non-oil imports fell by 0.7% in the quarter ending in January (from 0.1% in December), with imports of consumer goods contracting by less than before (-1.9% qoq/saar, from -2.8%), but with intermediate goods (2.0% qoq/saar, from 2.7%) and capital goods (-17.0% qoq/saar, from -14.6% in the 3Q18) weakening.

We expect the trade deficit to remain broadly stable between 2018 and 2019. On the one hand, lower oil production and the deceleration of the U.S. economy will exert downward pressure on Mexico’s exports. However, uncertainty over domestic policies and over the USMCA approval in US Congress will likely slow internal demand and curb external financing.


Julio Ruiz



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