Mexico’s medium-term trade outlook worsens, trade balance likely deteriorated further in November

Mexico’s medium-term trade outlook worsens in spite of flat trade prints in the near term. Following two positive readings in August and September, the trade figures dropped again in October. The year-to-trade data balance dropped to a deficit of USD 13.4 billion from a deficit of USD 12.3 billion as exports dropped 3.8 percent year-on-year, while imports fell 3.4 percent.

This trend is expected to have continued in November, which leads to an anticipation of a deficit of USD 13.15 billion. However, the rate of trade deterioration actually rebounded in 2016 as the gap between export and import growth was narrower than in 2015 when exports dropped 3.2 percent, while imports were almost flat.

Given that the investment demand is likely to decelerate, import growth is expected to stay depressed beyond the volatility in the monthly data. In the meantime, there is a chance of an exports boost in the near-term if U.S. demand growth rebounds, stated Societe Generale.

The trade figure might also get a boost from a rebound in oil prices. However, the trade outlook for the medium term has worsened seriously due to the U.S. election results. The possible changes to U.S. trade policies would probably be negative for the Mexican trade/GDP ratio, investment and growth outlook and the fiscal and external balances, according to Societe Generale.