The Day at a Glance | July 27 2023

*The US economy accelerated its pace of expansion in the 2Q23, surpassing market expectations.

*The European Central Bank (ECB) continued its increasing rates cycle with a 25 base points increase in all its key rates.

*In Mexico, the unemployment rate set at 2.7% as a proportion of the Economically Active Population during June, which entails a -0.3 percentage points decrease compared to the previous month and -0.77 percentage points drop compared to the same period last year. Additionally, the EAP increased by 858,950 thousand people over the last year, bringing the participation rate to 60.1%.

*Unemployment claims in the U.S. declined to 221 thousand (-7 thousand) in the week ending July 22nd, contrasting with the forecast that expected the figure to increase to 235 thousand. 

*Mexico’s trade balance recorded a surplus worth $34 million dollars in June, as a result of a 1.1% y/y increase in exports, while imports fell by 6.2% y/y.

*Wholesale inventories in the U.S. recorded a monthly -0.3% contraction in June.

 

Economic environment

The US economy remains resilient and grew at a 2.4% annualized rate in the 2Q23. This reading logged acceleration compared to the 2.0% annualized rate recorded in the previous period, and it exceeded the 1.8% annualized rate expected by the analysts´ consensus. Gross private investment drove the quarterly GDP expansion with a 5.7% annualized increase after a -11.9% annualized contraction was recorded in the first quarter, more than compensating for the slowdown in personal consumption (1.6% vs. 4.2% previously) and government spending and investment (2.6% vs. 5.0% previously).

The European Central Bank (ECB) increased its benchmark rates for a ninth consecutive time, as expected. The ¼ point move was backed by the argument that inflation has remained too high for too long despite the recent weakening of the bloc’s economy. With this, the ECB set the refinancing rate at 4.25%; the deposit rate at 3.75%, and the marginal lending rate at 4.50%. Regarding its forward guidance, the ECB pointed out that it will ensure that key rates are set at sufficiently restrictive levels “for as long as necessary” to make inflation converge to its 2% target level. It will also maintain a data-dependent approach to determine the appropriate level and duration of this tightening stance. Specifically, with regard to the upcoming (September) decision, ECB President Christine Lagarde stated that they will keep an “open mind,” which means they could either increase or maintain rates at their current levels, adding that they remain steadfast in their determination to tame inflation.