The Day at a Glance | April 18 2022

The Top

*China`s economy slowed down less than expected in the 1Q22 (4.8% annual).

*Energy reform bill didn’t obtain enough votes for its approval in the Chamber of Deputies.

*Libya reports crude oil production disruptions due to protests in the country`s largest oil field, Sharara.

*Central Bank of China decided not to reduce interest rates despite the economic slowdown.

Economic environment

China`s economy slows down. China`s 1Q22 GDP figure slightly exceeded estimates by recording a 4.8% annual rate of growth (4.4% e.). Growth logged in the first two months of the year contributed to a 1.3% quarterly rate of growth, but March logged an important slowdown due to confinement measures. In fact, the positive surprise in GDP was clouded by a strong decrease in consumption during March as retail sales receded (-) 3.5% at an annual rate – the first contraction since 2020. Additionally, the rate of unemployment increased to 5.8%, its highest level since 2020. Positive figures were logged in industrial production (5%) and fixed investment (9.3% YTD). It`s feared that weakness in the economy will continue through April and the 222 as the government maintains a zero tolerance policy regarding COVID-19 outbreaks. There are no signs that confinement measures will ease around the country, which could affect domestic industries and supply chains at a global level. With this, the 5.5% growth target for 2022 seems more and more unlikely. Even though authorities have reaffirmed their commitment to aiding the economy, the People`s Bank of China refrained from cutting rates and injecting liquidity into markets last Friday; a sign that stimulus will be limited. The bank only cut the capital requirements rate for the banking sector in 25 base points.

Mexico`s energy reform bill doesn`t move forward. The reform proposed by the Executive power – in order to change the constitution and return the CFE`s position of preponderance in the electricity sector – didn’t reach the 2/3 majority in the Chamber of Deputies that was required in order for it to be approved. The bill`s discussion and voting took place last night; the final result was 275 votes in favor, and 223 against, after opposing parties united to stop the bill`s approval. The result will prevent the CFE from controlling up to 54% of the electricity market, avoid limits on the private sector`s participation, and will maintain regulatory agencies in the sector independent. This is an important loss for Mexico`s current President, Andrés Manuel López Obrador, who has sought the energy sector`s nationalization since he took office.