* Trade deficit shrinks 32 percent from 2009
* Exports boosted by strong auto demand, higher oil prices (Adds background, analyst comment, byline)
By Patrick Rucker
MEXICO CITY, Jan 25 (Reuters) - Mexico narrowed its trade deficit in 2010 compared with a year earlier as the country's manufacturing exports swelled while oil trade surpluses also climbed, the national statistics agency said on Tuesday.
Mexico posted a deficit of $3.121 billion in 2010, a 32 percent decline from 2009 when it was $4.602 billion, the government's INEGI statistics institute said.
Mexico's total 2010 exports were $298.4 billion, a 29.8 percent increase from the previous year.
Roughly 80 percent of Mexico's exports are absorbed by the United States.
Increased demand north of the border helped lift Mexico's non-oil exports by 29 percent in 2010 to $256.7 billion.
Mexico's auto plants notably expanded exports last year, increasing 53 percent from 2009. They accounted for $65 billion out the total $246 billion in manufacturing exports in 2010, which climbed 29.5 percent from 2009.
Higher oil prices also gave a boost to Mexico, the sixth-largest oil producer in the world, with petroleum exoprts up 34.8 percent in 2010 to $41.7 billion.
Mexico's total 2010 imports also increased, climbing 29 percent to $301.5 billion.
The economic picture has recently brightened for Mexico as the U.S. economy returns to health and the finance ministry expects an expansion of between 4 and 5 percent this year.
Inflation has also been surprisingly muted in Latin America's second-largest economy with the government expecting prices to rise around 3 percent in 2011, in line with the central bank's forecasts.
STRONG EXPORTS
The Mexican economy is expected to have expanded by about 5 percent in 2010, going a long way to erase the 6.1 percent contraction in 2009.
A healthy export sector should strengthen Mexico's finances overall, Goldman Sachs wrote in a research note.
"The balance of payments picture remains solid," wrote economist Alberto Ramos. "Current account remains well anchored by the trade balance (while) the capital account has been generating steady surpluses -- anchored in recovering (foreign direct investment) and other capital inflows."
That surge of foreign investment has recently driven up the value of the peso and Mexican officials have said they are watchful that sudden currency gains do not create economic imbalances [nLDE70O1KC].
A strong peso, for instance, could raise the price of Mexican exports causing damage to that sector.
Mexico posted a $219 million trade deficit
For the government statistics agency's statement on the trade balance, pls go to: http://www.inegi.org.mx/inegi/contenidos/espanol/prensa/comunicados/balopbol.asp (Reporting by Patrick Rucker, Editing by W Simon)