Contraction of Mexico's real exports more than real imports to hurt trade balance

Despite the real depreciation of 8.8% of the MXN in the past 12 months, Mexican exports did not react as one would expect, resulting in a trade balance deficit of USD4bn, much larger than the USD0.3bn deficit in H1 14. 

This should be explained by the decrease in exports, which in real terms contracted more than imports, -5.0% against -3.1%, comparedwith H1 14. Part of the decline of exports can be explained by the contained improvement of the terms of trade, as they are just 0.9% higher year-to-date. 

"The weak performance of the economy explains why both exports and imports contracted during H1, although a rebound is expected in the second half of the year", says Barclays. 

Domestic consumption on the rise, coupled with even weaker FX rates, in light of the normalization of monetary policy in the US, should lead to stronger exports.