The Day at a Glance | October 22 2021

The Top

*Inflation in Mexico once again surprised to the upside.

*The economic slowdown continued in Europe during October; businesses transferred costs onto consumers.

*Biden acknowledges that he doesn`t have enough support in the Senate to increase corporate taxes.

*Chair of the FED Jerome Powell will make comments in a discussion panel organized by the Bank of International Settlements.

*Evergrande avoids default with coupon payments to dollar bonds of 83.5 million dollars.

*Biden assures he will defend Taiwan amidst any attack from China, in the middle of growing geopolitical tensions.

*Long term inflationary expectations in Europe set at 2%; in line with the ECB`s objective for the first time since 2014.

*U.S. and European countries reached an agreement to design new taxes for the digital economy in a multilateral manner.

*Economic indicators: PMI`s will be made public in the United States (Manuf. 60.3e.; Serv. 55.1e.).

Economic environment

Inflation in Mexico surprised to the upside in the first half of October. Inflation for consumers increased 0.54% during the first half of October and set at an annual 6.12% rate. The figure was slightly higher than estimated, although the main surprise was seen in the underlying component, with 0.33% biweekly growth (vs 0.19%e.). Underlying inflation reached 5.12% annual, its highest level since November of last year. Energy prices were the ones that contributed most to the increase (3.77% q/q; electricity 18.8%, LP Gas 4.42%), followed by commodities (0.37%), which maintain constantly growing figures among food and non-food goods. These upwards inflationary surprises do nothing but justify increasing interest rates in Mexico`s economy through the rest of 2021 and towards 2022.

Eurozone slows down in October. According to PMI`s published by IHS/Markit this morning, economic activity in the Eurozone continued to slow down in October and reached its slowest level of growth since April. The Composite PMI set at 54.3, below the estimated 55.2, pointing towards a greater expected slowdown in the European block. The manufacturing sector remained relatively stable (58.5), but persistent problems in productive chains kept production at its lowest levels since the implementation of quarantine measures in the first part of the year. Services slowed down to their slowest level in 6 months (54.7), pointing towards a weak start in the 4Q21. The entertainment, tourism and recreation sectors were affected by fears of a new outbreak of the virus in the region, particularly in Germany. Meanwhile, prices for goods and services increased to their highest level in the last two decades, with limited production due to problems among supply chains. This is expected to impact inflation for consumers in the following months. IHS/Markit warned that risks of a greater slowdown are high in light of growing prices and disruptions in the economy, even though the rate of growth remains above the last few years` average. GDP growth in the 4Q21 is expected to be considerably lower than in previous quarters.

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