Itaú BBA - MEXICO – Trade balance temporarily deteriorated in April

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MEXICO – Trade balance temporarily deteriorated in April

Maio 25, 2020

Weak exports and imports reflected the full COVID-19 effect in the economy.

The trade balance was below market expectations, dragged by the non-oil trade balance. The monthly trade balance posted a deficit of USD 3.1 billion in April, below our forecast of USD -0.1 billion deficit and median market expectations (USD 1.8 billion surplus, as per Bloomberg) – taking the 12-month rolling trade balance to a surplus of USD 6.3 billion in April (from a surplus of USD 10.9 billion in March). Looking at the breakdown, also using 12-month rolling figures, the energy trade deficit remained broadly stable at USD 21.4 billion in April (compared to a deficit of USD 22.2 billion in March), while the non-energy balance deteriorated to a surplus of USD 27.7 billion (from a surplus of USD 33.1 billion). At the margin, using 3-month annualized seasonally adjusted figures, the trade balance stood at a deficit of USD 4.3 billion in April (from a surplus of USD 19.7 billion in March), with the energy trade balance posting a deficit of USD 20.5 billion (from a deficit of USD 22.4 billion), while the non-energy trade surplus deteriorated to USD 16.2 billion (from a surplus of USD 42.0 billion).

Manufacturing exports deteriorated sharply in April amid the outbreak. Using seasonally adjusted figures, manufacturing exports contracted 39.7% month-over-month, taking the quarter-over-quarter annualized growth rate (qoq/saar) to -46.4% in April (from 5.9% in March). Auto sales were severely affected, contracting 74.5% qoq/saar in April (from 14.5% in March), but restarting of auto manufacturing operations should improve this sector’s exports ahead. Likewise, oil exports contracted 87.5% qoq/saar in April dragged by low oil prices. 

Non-oil imports also decelerated sharply. Total imports fell by 37.9% qoq/saar in April (from -4.7% in March), with non-oil imports posting a contraction of 34.6% qoq/saar (from -5.2%). Within non-oil imports, consumption (-54.7% qoq/saar in April, from -26.0% in March), intermediate (-30.1%, from 1.0%) and capital (-43.9%, from -24.8%) goods all contracted sharply.

We expect the current account balance to remain narrow (-0.3% of GDP). While exports deteriorated at a faster pace than imports in April, we expect external sales to recover faster than imports due to a better performance of domestic demand in the U.S. relative to Mexico and the weaker Mexican peso.

Julio Ruiz

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