Mexico: Worst trade gap on record masks robust underlying dynamics
The January trade report yielded mixed results, with the merchandising trade deficit widening from USD 0.2 billion in December to a record-high of USD 4.4 billion in January, well above the USD 3.4 billion gap market analysts had expected. The headline figure, however, reflected very robust import growth rather than weak export momentum, which suggests the Mexican economy remains relatively healthy early in the year.
Exports expanded a solid 12.5% from the same month of the previous year in January, the highest figure in three months and well above the 7.9% year-on-year increase recorded in December. Exports totaled USD 30.7 billion in January. The stronger figure reflected a marked pick-up in both auto and non-auto manufacturing exports, with overall exports of manufactured goods rising 10.5% on annual terms in January. The print nearly doubled the 5.3% increase recorded in the previous month.
Import growth accelerated in unison, and at a more marked pace than exports. Building on surprisingly resilient domestic demand dynamics, imports leaped 14.1% in year-on-year terms in January to a total of USD 35.1 billion, a higher print than the 8.6% expansion recorded in the previous month. Non-oil intermediate imports—a proxy for incoming manufacturing output—was very solid at 13.0% growth, which points to sustained momentum in the all-important manufacturing sector. Capital good imports also jumped in the month to 18.8% growth (December: +4.7% year-on-year), indicative of a pick-up in business outlays despite lingering uncertainty regarding NAFTA and the upcoming general elections. Meanwhile, non-oil consumer good imports surged by nearly a fifth in January, showcasing households’ resilience to still-high inflation and tight monetary conditions.
The 12-month trailing trade deficit widened to USD 11.8 billion in January from USD 10.9 billion in December, above the USD 13.3 billion deficit recorded in January 2017.