Mexico: December trade balance – Strong headline; weak results

Mexico: December trade balance – Strong headline; weak results

Nader Nazmi - Market Economics
Latam Macro Snapshot | 25 Jan 2013 17:12 | 81 Kb

Here is the good news. Mexico reported a December trade surplus of USD 962mn while the consensus was expecting a deficit of USD 936mn. Now, the not-so-good news. Both imports and exports were weak and the surplus is explained by the fact that imports were weaker than exports.

A good part of December’s low exports growth was due to a 19.3% y/y decline in petroleum exports. The growth of non-oil exports remained robust at 8.1% y/y owing to an 8.9% y/y rise in exports of manufactured products.

Seasonally adjusted data better demonstrate the weakness of the external sector in December. Imports were 3.4% lower in December than in November (sa), reflecting across-the-board weakness. Consumers cut back spending on imports by 12.7% (m/m, sa) despite the fact that the MXN appreciated 1.1% in the month. Imports of intermediate goods and capital goods declined by 1.2% m/m (sa) and 5.4% m/m (sa), respectively. Total exports fell 0.9% in the month (sa) as oil exports contracted 12.6% m/m (sa) while non-petroleum exports increased 0.9% m/m (sa).

First full-year trade surplus since 1997. The trade balance shifted from a deficit of USD 1.5bn in 2011 to a small surplus of USD 0.2bn in 2012. Exports of manufactured products increased 8.4% in 2012, underpinning a 6.2% increase in overall exports.

Capital goods imports increased 10.1% in 2012, down from 15.8% in 2011. The deceleration was even more pronounced for intermediate goods imports. Imports of these products increased by 5.3% in 2012, down from 14.9% in 2011 and 34.5% in 2010. At this point it is unclear whether the 2012 slowdown in imports of capital and intermediate goods would translate into weaker GDP growth in 2013. For one thing, these imports rebounded strongly in Q4.

Looking forward, we anticipate robust growth in imports on the back of strengthening domestic demand in Mexico. The performance of the exports sector will depend on the strength of the MXN, demand from the US and international petroleum prices. We thus expect weaker exports growth in the coming months owing to slow US Q1 growth (1.0% q/q saar) and a stronger MXN.