The Day at a Glance | January 29 2021

The Top

· The Mexican economy grew 3.1% in the 4Q20 (-4.6% annual); it contracted (-) 8.5% in 2020.

· Growth in Europe during the 4Q20 is a positive surprise.

· Inflation in the US (PCE) closed 2020 with a 1.3% annual rate.

Economic environment

The Mexican economy grew 3.1% during the 4Q20, according to INEGI`s first estimate. The data shows a 3.3% quarterly increase in the industrial sector and 3% in services; primary activities contracted (-) 2.6%. At an annual rate, the industrial sector (-3.4%) and services (-5.3%) closed the October-December period in contractionary territory while primary activities were the only ones to record expansion (4.9%). With this, the economy`s contraction during 2020 set at (-) 8.5%, compared to 2019. Industrial activities recorded the largest contraction in 2020 (-10.2%), followed by services (-7.9%). This is one of the greatest contractions in the economy`s history and occurred after the pandemic, which affected activities during almost the entirety of 2020. A 3.5% or larger rate of growth is expected for 2021, backed by the US economy`s reactivation, foreign demand and a slow recovery in the domestic market.

Main growth figures published in Europe suggest there is greater than expected resilience in the region`s largest economies. According to 4Q20 growth data, the Spanish, French and German economies recorded larger than expected growth. Spain recorded a 0.4% quarterly rate of growth (vs -1.5% e.), while Germany grew marginally (0.1% vs 0% e.) and France showed a smaller than expected contraction (-1.3% vs -4% e.). The figures suggest that the European economies were more resistant to the virus than expected in the October-December period, even though seeing a recession in the 1Q21 has not been discarded. Quarantine measures will still have an impact on the block`s activities in the first months of 2021 and vaccination programs are still seeing important delays. Leading indicators show greater weakness in the economy in January and growth expectations are still cloudy in the region.