Mexico: Trade balance surprises to the downside in May, details paint a rosy picture
June 27, 2017
The external sector seemingly kicked into higher gear in May. The trade report showed exports growth regaining most of its recently lost momentum, accelerating from a lackluster 4.5% year-on-year expansion in April to a hefty 12.9% increase in May and pushing the value of Mexico’s overseas sales to USD 35.5 billion. The headline figure was supported by a robust performance in the key manufacturing sector—manufacturing exports were up 12.9% in annual terms in May—which accounts for about 90% of total exports.
Imports swung from April’s 5.0% decrease to a 14.7% rise in May, the result of a broad-based increase across import categories. A steep increase in non-oil intermediate imports drove the result, which is likely to provide additional support to manufacturing exports in upcoming months. Mexican households also pulled their weight in May, with consumer imports also recording a strong expansion in May. All in all, imports totaled USD 36.5 billion, resulting in a USD 1.1 billion trade deficit. This contrasted last month’s USD 0.9 billion trade surplus and confounded market analysts, who had expected a USD 1.0 billion surplus.
In line with May’s result, the 12-month trailing trade deficit widened to USD 9.6 billion, slightly above April’s USD 8.9 billion shortfall. Notwithstanding this month’s headline figure, the strong performance in both exports and imports highlights the strong dynamism for overall trade in Mexico. The external sector is however facing an unexpected challenge: the Mexican peso rose to its strongest level in more than a year against the U.S. dollar on 26 June, which is likely to dent exporters’ margins and render Mexican goods less competitive in overseas markets.
Author: David Ampudia, Economist