The trade balance posted a deficit of USD 1.4 billion in August, broadly in line with both - our forecast of a deficit of USD 1.1 billion and market consensus (as per Bloomberg). The 12-month rolling trade balance narrowed to a deficit of USD 10.7 billion in August (from a deficit of USD 15.1 billion in July), supported by a lower energy trade deficit of USD 25.8 billion (from a deficit of USD 28.5 billion) and a larger non-energy trade surplus of USD 15.1 billion (from a surplus of 13.4 billion). At the margin, using three-month annualized seasonally adjusted figures, the trade balance stood at a deficit of USD 1.3 billion in August (from a deficit of USD 19.1 billion in 2Q23). Looking at the breakdown, manufacturing exports fell by 1.4% mom/sa dragged by vehicle exports, although momentum remains positive (11.5% qoq/saar in August, from -0.4% in 2Q23). Non-energy imports expanded 0.8% mom/sa in August, with sequential expansions across all categories (non-energy consumption, intermediate and capital imports). The qoq/saar of non-energy imports stood at 8.2% in August (from 16.2% in 2Q23).
Our view: Our trade balance forecast of a deficit of USD 23 billion for 2023 has an upward bias (smaller trade deficit) given a better-than-expected evolution in the trade balance. Manufacturing exports growth will likely remain soft in the 2H23 (we anticipate a temporary negative effect from the strikes in U.S. vehicle industry in September’s figures), which should be mitigated by slower growth of non-energy imports as internal demand softens.
See detailed data below