Economics: External accounts project uncertainty in the near future
External account data clearly captured the extent of the profound economic contraction in April-May, including a precipitous fall in demand that tended to ease up during June-July, but as yet there is no evidence of a clear recovery trend.
Second quarter balance of payments results showed Mexico’s surplus had shrunk to 4.8 million dollars, a tiny fraction of the 4.38 billion dollar surplus reported for the same three-month period of 2019.
Net Direct Investment was 70% below 2Q19 levels as a 316% yoy surge in direct investments abroad by Mexicans dwarfed a slight uptick in FDI entering Mexico, with new investments and reinvestment plummeting even as parent company accounts soared.
Government officials have been keen on bragging about Mexico's managing to maintain a trade surplus amid it all, but that accomplishment is being sustained by the degree to which the flagging of domestic demand meant imports plummeted even more than exports, which suffered record contractions in key segments such as manufactures.
Among manufacturing exports, the automotive branch was practically paralyzed between April and May, and while the production chain reopened in June, exports levels remained considerably below levels of a year earlier, with the five branches that suffered setbacks on the order of 50% in April-May also reporting a significant curtailment for June.
Among imports the drop has been most pronounced in the case of consumer goods, a reduction that coincides with the significant erosion in consumption of durable and semidurable goods, but imports of intermediate and capital goods have also taken a beating.
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