Mexico’s trade balance seems to have deteriorated in July

Mexico’s trade balance has continued to deteriorate in 2016 following a considerable fall last year; however, the pace of decline appears to have moderated slightly in the first half of 2016 as imports seem to have declined further.

Mercantile exports continue to fall at a considerable rate in dollar terms in 2016 due to weak demand for manufacturing products from the US, said Societe Generale in a research report. But imports have suddenly declined a bit in recent months, thanks to a moderation of growth expectations.

“This trend is likely to persist in near term, leading us to project a lower trade balance of USD2,597m in July (-USD524m in June and -USD2,376m in July 2015) on the back of -3.1 percent yoy and -4.0 percent yoy growth in imports and exports respectively”, noted Societe Generale.

The year-to-date trade balance through July is likely to have deteriorated to –USD 9.7 billion as compared with –USD 6.5 billion in the same period last year. Lower manufacturing exports indicate towards subdued demand from the US that would keep on determining Mexico’s manufacturing and trade growth.

If growth in the US accelerates, it might assist in rebounding manufacturing production and exports even if lower oil exports keep trade balances low. Declining oil prices have impacted the external account as well as the country’s public finances. Consequently, the current account balance has deteriorated by between 0.5 percent and 0.8 percent of GDP on a structural basis, stated Societe Generale.