The Day at a Glance | April 12 2023

*Inflation in the US slowed down more than expected and set at an almost two-year low. However, the core component rebounded in March, in line with expectations. 

*The International Monetary Fund (IMF) lowered its growth forecasts for 2023. 

*In Mexico, nominal wages rose 9.2% y/y in March, compared to an 8.4% increase the previous month. Moreover, this is the third highest figure since September 2001. 

*Today at 12:00pm Mexico City time, the Federal Reserve`s March 22nd meeting minutes will be revealed.  

Economic environment

Inflation in the US moderated its increase in March by logging a 5.0% figure, down from a previous 6.0% – and below the consensus estimate of 5.1%. The surprise was not only seen in the annual reading, which benefited from the base comparison, but also in the monthly increase, which set at 0.1%; this was lower than the expected 0.2% and was the second lowest monthly increase since May of 2020. This figure is mainly attributed to the null monthly variation in food prices (0% m/m) and the -3.5% monthly decline in energy prices. However, the core component – which excludes food and energy – rebounded in its annual reading and set at 5.6% (+0.1pp) in March, setting in line with expectations, and remained close to 40-year high levels. On a monthly basis, the figure set at 0.4%, marginally lower than February`s 0.5%. Additionally, the 0.4% figure was made up of a 0.4% monthly increase in services (excluding energy related services), due to an acceleration in transportation services (1.4% m/m vs 1.1% m/m prev.), which led the annual reading to set at 13.9%. With this, services contributed 4.1pp towards general inflation. All in all, despite the marked slowdown in inflation during March, persistent pressures in the underlying component add to the narrative that the FED will raise the federal funds rate once again in its next meeting.  

The IMF lowered its global economic growth forecasts. In its most recent report, the organization revised its 2023 and 2024 global growth estimates downwards. The IMF`s forecasts now point towards a 2.8% rate of growth in 2023 (vs 2.9% prev.), and 3.0% for 2024 (3.1% prev.). This is mainly due to the fact that high interest rates around the world have cooled global economic activity. However, the IMF noted that while inflation has decreased because of restrictive monetary policies, there are still price pressures and tight labor markets in many economies. In addition, the IMF warned that some secondary effects of the fast rise in rates have begun to become apparent; for example, vulnerabilities in the banking sector, which have become the focus of attention due to fears of contagion to other sectors in the financial system. Finally, the fund warned that an event severely affecting the financial sector could bring its global growth forecasts to recession levels. The IMF mentioned that the rest of the forces that shaped the global economy in 2022 will continue this year but with different intensities amidst a highly uncertain environment.