Itaú BBA - MEXICO – Trade balance improved in 2019

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MEXICO – Trade balance improved in 2019

Janeiro 28, 2020

Weak non-oil imports supported the improvement in the trade balance

The trade balance improved in 2019. Monthly trade balance posted a surplus of USD 3.1 billion in December, above median market expectations (USD 2.5 billion surplus, as per Bloomberg) – taking the 2019 trade balance to a surplus of USD 5.8 billion (from a deficit of USD 13.6 Billion in 2018). Looking at the breakdown, the 2019 energy trade deficit remained broadly stable at USD 21.2 billion (compared to a deficit of USD 23.2 billion in 2018), while non-energy balance improved to a surplus of USD 27.0 billion (from a surplus of USD 9.5 billion). At the margin, using 3-month annualized seasonally adjusted figures, trade balance stood at USD 9.6 billion in 4Q19 (from a surplus of USD 10.8 billion in 3Q19), with the energy trade balance posting a deficit of USD 20.1 billion (from a deficit of USD 20.8 billion), while the non-energy surplus stood at USD 29.7 billion (from USD 31.6 billion).

At the margin, manufacturing exports deteriorated in 4Q19. Using seasonally adjusted figures, the quarter-over-quarter annualized growth rate (qoq/saar) of total exports was -12.8% in 4Q19 (from -2.2% in 3Q19), dragged by a deterioration in manufacturing exports (-12.9%, from -0.9%), while oil exports contracted by 10.2% (from -42.9%). Weakness in Mexico’s manufacturing sector last year was associated to a deceleration in U.S. industrial activity. 

Non-oil imports remained weak in 4Q19. Total imports fell by 12.1% qoq/saar in 4Q19 (from -3.7% in 3Q19). Looking at the breakdown, non-oil imports deteriorated (-12.2% in 4Q19, from 2.9% in 3Q19), with non-oil imports of consumption, intermediate and capital goods at 7.2% (from 2.2%), -17.1% (from 5.3%) and 10.0% (from -13.8%), respectively. We note that on a monthly basis non-oil imports of consumption (-1.2%) and capital (-1.9%) goods contracted, pointing to a weak internal demand in December. 

We expect the trade balance to deteriorate in 2020 relative to 2019. A moderate slowdown in U.S. economic activity in 2020 (relative to 2019) will have some effect on manufacturing exports, while a modest recovery in internal demand will likely support an improvement in non-oil imports.

Julio Ruiz

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