Mexico trade balance to have bounced back in February

Mexico's export and import growth in January was disappointing and can partly be explained by low oil prices. The sharp rise in the trade deficit (on both a monthly and annual basis) can be partly explained by lower oil exports, apart from the seasonal base effect. 

"We expect export and import growth to have bounced back to their recent trends in February. Merchandise exports are expected to have grown by 4.5% yoy, while merchandise imports are expected to have grown by 6.7% yoy. This should help economy post a trade surplus of USD310m", says Societe Generale.

In 2014, exports grew by 4.6% while imports were up 4.9% (versus 2.5% and 2.8% respectively in 2013). Despite its arithmetically negative impact on the trade balance, and through its direct contribution to growth, the strong imports number suggests strengthening investment growth in Q4 (and probably a pick up in consumption). 

The current account balance deteriorated in 2013 (-2.4% of GDP) on the back of lower exports. Moreover, despite stronger export growth in 2014, the balance (-2.3% of GDP) remained somewhat under stress as imports have also improved due to stronger investment demand growth. 

"Stronger manufacturing export growth in 2015 and 2016 should help improve the balance somewhat, although lower oil prices will likely hinder the extent of the improvement. Falling oil prices have hit both the external account and Mexico's public finances", added Societe Generale.