MEXICO: EXPORTS SLOWED IN 2023, AS CONSUMPTION AND CAPITAL IMPORTS HOLD A STRONG DYNAMISM
The trade balance reported a 4.24 billion dollars (bd) monthly surplus in December, up from 629 million dollars (md) previously (chart 1). In particular, imports dropped -6.9% y/y (vs. 0.4% previously), as capital goods decelerated 7.9% y/y (15.9% previously), consumer goods declined 12.0% (22.6% previously), and intermediate goods fell -11.8% (-4.9%). Exports also decreased, to -0.1% y/y (2.0% previously). Manufactures exports moderated to 1.1% (2.6%), but automotive exports rose 13.2% (7.7% previously) (chart 2).
Considering 2023 cumulative numbers, the trade deficit lowered to -5.464 bd, in comparison to -26.879 md deficit in 2022. Exports moderated to 2.6% (vs. 16.7% in 2022), affected by the USDMXN appreciation, but also to lower economic demand from the US, as its biggest trade partner moderates its manufactures activities. Auto exports led the way during the year, catching a still uprising demand, with a 14.3% increase (vs 18.2% a year earlier), while the rest of manufactures dropped -0.9% (15.8% in 2022), averaging a 4.0% increase in total manufactures. Oil exports, on the other hand, dropped -14.8% during 2023 (see table 1).
Imports dropped -1.0% in 2023, contrasting to a 19.1% increase in 2022. The fall came from intermediate goods, at -4.9% (18.1% a year earlier). However, capital goods increased at a solid pace, at 20.0% (18.9% previous), as consumption imports decelerated to 9.3% from a strong 29.4%, but holds a very positive outlook, as household incomes stick to a upside trend owing to strong double-digit remittances and above inflation wage increases.
The Mexican recovery after the 2020 crisis was led by a strong export dynamism, but the restrictive policy rates, changes in the consumption basket, and the USDMXN appreciation has cooled exports activity. For 2024, the outlook is positive, but moderate, as analysts expected a year of slow activity in manufactures, as restrictiveness in policy rates takes effect. On the other hand, robust public spending in Mexico could boost internal consumption for next year, also increasing expectations of a dynamic pace in imports. In the longer term, the expectations outlook is brighter, but faces higher risks, as nearshoring expectations still have to materialize, and the future of trade relations between Mexico and its main partners considerably depends on the development of political initiatives in both Mexico and the US to be stated in their upcoming general elections of this year.
—Brian Pérez & Miguel Saldaña
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