The Day at a Glance | December 23 2021

The Top

*General inflation in Mexico surprised to the downside during the first half of December (7.45%); but the underlying component accelerated more than twice compared to estimates.

*The White House decided to extend the pause on student loan repayments for an additional 90 days.

*China has purchased about 59% of the goods it promised to buy from the U.S. during 2020-2021, according to the trade agreement reached during Trump`s administration

*U.S. shows it could help negotiate tensions between Russia and Ukraine next month.

*Larry Summers warns about the risks of a recession in the short run in the U.S. – as well as economic stagnation in the long run.

Economic environment

Increased prices persist in Mexico. Inflationary data for the first half of December showed a slowdown regarding the annual rate of inflation by logging a 0.1% rate of growth during the biweekly period (vs 0.31%e.) and set at 7.45% annual. The drop among energy resources (-2.07% biweekly; LP domestic gas -9.63%) and agricultural goods (-1.14%; fruits and vegetables -3.48%) account for a large part of the slowdown; but the less volatile components still show considerable inflationary pressures. Commodities logged their largest biweekly increase in prices so far this year (0.6% biweekly), led by non-food commodities (0.77%), which recovered after the discount season; while services logged a 0.57% biweekly rise boosted by airfares (31.88%) and tourist packages (18.55%), an increase related to seasonality effects, although the sector also logged recovery after the pandemic. With this, underlying inflation increased 0.59% biweekly (vs 0.23%e.) and continued to increase to an annual 5.87% rate. It will be important for general inflation to confirm a decrease in the first months of 2022 – and for underlying inflation to stop its rise in order for its trend to converge to Banxico`s expected tendency; the central bank is expected to increase the target rate in 100-125 base points next year.