Mexico: Manufacturing exports regain some strength in August
September 27, 2017
The external sector appears to have regained some traction in August. The trade report shows exports expanded 10.3% year-on-year in August, reaching a total of USD 35.8 billion. The figure was above the 8.0% increase recorded in the previous month and reflected stronger overseas sales of Mexican manufactured products, which account for about 90% of total exports. Manufacturing exports were up 10.7% in annual terms in August, notably above the 7.2% increase recorded in the previous month. The improvement was in line with strong PMIs, manufacturing, employment and automotive production readings in August.
Imports soared 12.2% in August over the previous year, accelerating from a 6.6% year-on-year expansion in July and pushing the value of Mexico’s imports to USD 38.5 billion. The improved performance in imports likely reflected resilient dynamics in the domestic economy. Non-oil durable goods growth decelerated slightly to a still-strong 7.7% increase (July: +7.9% year-on-year), backing up the narrative that private consumption will ease in H2 but will remain supportive of growth. Capital imports growth also regained all of its strength after nearly stagnating in July, while non-oil intermediate goods also regained some footing in August. The latter points to robust momentum ahead in the manufacturing sector, given intermediate goods’ strong correlation with the manufacturing cycle.
The 12-month trailing trade deficit widened to USD 9.5 billion—above July’s two-year low of a USD 8.7 billion shortfall. Notwithstanding this month’s headline figure, the strong performances of both exports and imports highlight the dynamism of overall trade in Mexico. However, the recovery of the peso and a tight labor market risk are eroding Mexico’s competitiveness, which could weigh on its external sector.
Author: David Ampudia, Economist