The Day at a Glance | November 24 2021

The Top

*Inflation in Mexico exceeded an annual 7% rate during the first half of November.

*AMLO withdrew Arturo Herrera as a candidate for Governor of Mexico`s Central Bank in August; he will recommend Victoria Rodriguez Ceja.

*Luis de Guindos, Vice-President of the ECB, admitted that factors boosting inflation have become more structural and continue to affect growth.

*U.S. GDP was revised upwards for the 3Q21 (2.1% vs 2% prev.); inflation (PCE) for the quarter set at 5.3%.

*Initial jobless claims in the U.S. fell under 200 thousand since the pandemic (199 thousand).

*The European Commission suggests members of the E.U. to maintain an expansive fiscal policy in 2022 in order to back recovery.

*Activity in the U.S. services sector surprised to the downside during November (Services PMI 57 vs 59.1e.).

*South Korea logs record number of Covid-19 cases.

Economic environment

Accelerated inflation persists in Mexico. The country`s Consumer Price Index once gain surprised to the upside by recording a 0.69% rate of growth (vs 0.5% e.) during the first half of November, the largest biweekly growth in prices so far this year. At an annual rate, general inflation reached 7.05%. The component that increased the most was non-underlying inflation, which strongly increased agricultural prices (2.17%), especially fruits and vegetables (3.49%); while energy prices logged a 3.32% biweekly rise, and were boosted by an increase in electricity prices (24.16%) as the electric bill subsidy came to an end in 11 cities. For its part, the underlying component barely increased 0.15%, with commodities logging their slowest biweekly rate of growth this year (0.07%) after contractions were seen in non-food goods, something possibly related to Buen Fin discounts. Services logged a 0.25% increase in prices. With this, underlying inflation accelerated to an annual 5.53% rate, in good part because of an important contraction in prices during the same two-week period in 2020. Data suggests that inflation continues to accelerate, which will keep the Central Bank of Mexico alert. Even though November`s annual rates are expected to be high due to last year`s low base comparison, biweekly figures continue to log a strong rise (the highest biweekly increase this year) due to shocks seen in energy and agricultural goods, which guarantees that Banxico will continue to increase rates in 2022. The pace at which rates are increased could speed up in case the rise in inflation doesn’t become more moderate by the end of 2021.