​January Trade Balance surprised on the upside

ARGENTINA - In Brief 01 Mar 2021 by Esteban Fernandez Medrano

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Most market attention will be set today on Alberto Fernandez’s speech during the opening sessions of Congress, which is expected to happen at noon, local time. This said, in this opportunity, we would like to review January’s trade balance published Friday afternoon. Even though the December to February period tends to be, due to the summer vacations, months that often show higher volatility than others, January trade balance surprised nevertheless. The combination of improving commodity prices and Brazil’s recovery caused January’s exports to rise well above expectations. Following a seasonally adjusted drop of -20.2%m/m in December, January reported a rebound of 58.4%m/m. Taking a three-month moving average, to further smooth the SA series’s volatility, quarter-on-quarter growth went from -6.4%q/q in December to 3.3%q/q in January. Or analyzing the Non-seasonally-adjusted time series, annual growth bounced from -34.1%y/y in December to 7.3%y/y in January. When analyzing the trade decomposition, we can see that primary exports (mostly agricultural) were the ones that had the worst performance (-30.0%y/y vs. -42.4%y/y taking a 3mma) even though Manufactures of Agricultural origin explained most to the rebound. This apparent shift to more value-added agricultural exports is not bad news. But it reminds us that this rebound happened before Alberto Fernandez threatened, in early February, to raise export taxes or impose export coupons to limit the inflation path through of rising commodity prices on local inflation on food. Usually, such warnings tend to spur exports rather than reduce domestic prices, Februarys CPI will tell. But in any case, it does not help rising inve...