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 Business News | June 2005 
Slowing U.S. Demand Hurts May Exports
 Wire services
| | Industrial output has faltered this year on decelerating demand from the United States, which buys 85 percent of the nation's exports. |
The nation's export growth slowed in May as U.S. demand weakened for manufactured goods such as electronics, home appliances and furniture.
Exports rose 13.3 percent from the year-earlier period to US18.31 billion, less than the increases of 18 percent in April and 18.8 percent in May 2004, the Finance Ministry said. Imports rose 14.3 percent to US18.36 billion in the month, leaving the country's trade deficit at US52 million.
"We have seen a manufacturing slowdown in the U.S.," said Paulo Leme, managing director for emerging markets at Goldman Sachs & Co. in Miami. "We should expect a slowdown in Mexico."
The weakening in the nation's exports to the United States is dragging on the expansion in Latin America's biggest economy. The growth rate fell in half to 2.4 percent in the first quarter from 4.9 percent in the fourth quarter.
JPMorgan Chase & Co., Bear Stearns Cos. and Credit Suisse First Boston Inc. all lowered their 2005 economic growth forecasts after Mexico released the firstquarter figures in May.
JPMorgan cut its forecast to 3.2 percent from 4 percent, Credit Suisse reduced its estimate to 3.7 percent from 4.4 percent and Bear Stearns reduced its forecast to 3.4 percent from 4 percent. The government forecasts growth of 3.8 percent this year.
Industrial output has faltered this year on decelerating demand from the United States, which buys 85 percent of the nation's exports. Industrial production rose 1.3 percent in the first four months of the year, less than half the 2.7 percent increase in the same period last year. U.S. industrial production fell for a third month in four in May, when compared to the year-earlier period.
Economists had forecast an 11.8 percent rise in exports in May, according to the median of five forecasts in a Bloomberg survey.
A three-month rally in the peso has also crimped export growth, Economy Secretariat Fernando Canales said on June 9. The peso has gained 4.8 percent since March to 10.7872 pesos to the dollar, making the country's products more expensive in export markets.
Competition from China and other Asian countries is further curbing Mexican export growth, Thierry Wizman, managing director of emerging market strategy at Bear Stearns, said in a June 21 report. Mexico's share of the U.S. import market, excluding oil, has fallen from 10 percent in 2002 to 8 percent in 2005, Wizman said.
In the first four months this year, China's exports to the U.S. have increased 28 percent from a year ago compared with an 8 percent increase for Mexican exports, according to the U.S. Commerce Department.
Cheaper Chinese furniture has caused Monterrey-based furniture maker Emy Muebles to decrease its U.S. exports to 10 percent of production from 30 percent two years ago, said Adrian Rojas Cedillo, Emy's chief executive officer. Competition has forced Rojas to focus on a smaller U.S. market of custom-made furniture for department stores, he said.
"You can't compete with the Chinese labor costs," Rojas said in a telephone interview. "The only thing you can do is find another niche to become more competitive."
Export growth would be even lower if not for record-high oil prices. Oil exports, which accounted for 14 percent of the nation's exports during the first four months this year, rose 17.4 percent from a year ago to US2.3 billion in May, according to the state-owned oil monopoly Petroleos Mexicanos. |
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