Itaú BBA - MEXICO – Trade balance improved in January

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MEXICO – Trade balance improved in January

Fevereiro 28, 2020

Manufacturing exports improved on a monthly basis, but momentum is still weak

The trade balance improved in January. Monthly trade balance posted a deficit of USD 2.4 billion in January, above median market expectations (USD 3.3 billion deficit, as per Bloomberg) – taking the 12-month rolling trade balance to a surplus of USD 8.1 billion in January (from a surplus of USD 5.8 billion in December and the highest figure since April 1996). Looking at the breakdown, also using 12-month rolling figures, the energy trade deficit remained broadly stable at USD 20.9 billion in January (compared to a deficit of USD 21.2 billion in December), while non-energy balance improved to a surplus of USD 29.0 billion (from a surplus of USD 27.0 billion). At the margin, using 3-month annualized seasonally adjusted figures, trade balance stood at a surplus of USD 16.8 billion in January (from a surplus of USD 10.4 billion in December), with the energy trade balance posting a deficit of USD 17.9 billion (from a deficit of USD 20.0 billion), while the non-energy trade surplus stood at USD 34.7 billion (from a surplus of USD 30.4 billion).

At the margin, manufacturing exports improved on a monthly basis (3.1%, from 0.4% in December), but momentum is still weak. Using seasonally adjusted figures, the quarter-over-quarter annualized growth rate (qoq/saar) of total exports was -0.6% in January (from -11.3% in December), with manufacturing exports down by 4.7% (from –11.4%), while oil exports improved significantly (102.5%, from -5.7%), likely associated to some stabilization observed in oil output and a low base of comparison (despite lower oil prices in January). 

Non-oil imports momentum remains weak, despite a month-over-month improvement in January (1.6%, the first positive figure after five months of contraction). Total imports fell by 5.3% qoq/saar in January (from -10.5% in December). Looking at the breakdown, non-oil imports posted a contraction of 6.6% qoq/saar in January (from -10.6% in December), with non-oil imports of consumption, intermediate and capital goods stood at -2.4% (from 7.7%), -8.2% (from -15.0%) and 1.1% (from 8.4%), respectively.

In all, Mexican external accounts remain solid, helped by an incipient improvement of exports (which should continue as long as the U.S. economy continues to grow at a decent pace), while internal demand is yet to rebound more clearly. Looking ahead, some deterioration of external accounts are likely considering our expectation of a soft improvement of Mexico’s internal demand (due to lower uncertainty over trade relations with the U.S. and a recovery of public sector demand). 

Julio Ruiz

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