Itaú BBA - MEXICO – Stable trade balance in October

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MEXICO – Stable trade balance in October

Novembro 27, 2019

Weakness in the U.S. economy is weighing on manufacturing exports

On a 12-month rolling basis, the trade balance improved in October, but remained practically unchanged at the margin. Monthly trade balance posted a USD 0.7 billion deficit in October, below our forecast of USD 0.3 billion surplus and above median market expectations (USD 1.9 billion deficit, as per Bloomberg) – taking the 12-month rolling to a surplus of USD 1.5 billion (from a deficit of USD 0.7 billion in September). Looking at the breakdown, also using 12-month rolling figures, energy deficit remained broadly unchanged at USD 22.5 billion (compared to September), while non-energy balance improved to a surplus of USD 24.0 billion (from USD 22.1 billion). At the margin, using 3-month annualized seasonally adjusted figures, trade balance remained practically unchanged at USD 10.6 billion in October (compared to September), with the energy trade balance posting a deficit of USD 22.1 billion (from a deficit of USD 21.5 billion), while the non-energy surplus stood at USD 32.6 billion (from USD 32.2 billion).

At the margin, manufacturing exports deteriorated further, reflecting softness in the external demand. Using seasonally adjusted figures, the quarter-over-quarter annualized growth rate (qoq/saar) of total exports was -5.6% in October (from -1.5% in September), dragged by a deterioration in manufacturing exports (-2.4%, from 0.2%), while oil exports contracted by 51.2% (from -47.4%). Weakness in the U.S. economy is weighing in Mexico’s manufacturing sector.

Non-oil imports momentum remained weak. Total imports fell by 5.2% qoq/saar in October (from -2.6% in September). Looking at the breakdown, non-oil imports deteriorated further (-0.23% in October, from 4.1% in September), with non-oil intermediate (-1.3%, from 6.7%) and capital (0.0%, from -14.1%) imports remaining weak,  while non-oil imports of consumption goods improved to 7.9% (from 3.8%).

We expect the trade balance to improve in 2019 relative to 2018. Nevertheless, the improvement in the trade balance is moderating as manufacturing exports deteriorate, reflecting softness in U.S. economic activity, while non-oil imports momentum remains weak, associated to the uncertainty over domestic policy direction and trade relations with the US. 

Julio Ruiz

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