The Day at a Glance | April 29 2020

US economy contracts more than expected in 1Q20

Data released by the Bureau of Economic Analysis of the US Department of Commerce confirmed a quarterly annualized (-) 4.8% contraction in the first quarter of the year. The contraction was observed in practically all of the GDP`s components, except government spending (0.7%), which recorded its lowest growth since late 2018. Consumption contracted (-) 7.5%, its largest drop since 1980; and investment fell (-) 5.6%, with both subtracting a little more than 6% from GDP. Net exports partially offset this contraction and contributed up to 1.3% of growth, after a substantial fall in imports (-15.3%) was much larger than that recorded in the exporting sector (-8.7%). The contraction in the economy points out the end of the largest economic expansion in the country`s history, and is comparable to the contraction recorded in 2009. 2Q20 figures are expected to set a new record of contraction in the US, and with this, a recession in the world`s largest economy is confirmed.

Oil production increases in Mexico

Oil production increased in Mexico in March to 1.746 million daily barrels, the highest level in 17 months (+1.5% monthly, +3.6% annual). The figure considers PEMEX`s production as well as private production, and recorded the first annual increase in 14 years. PEMEX recorded its first annual increase in production since 2016 (1.8%), with 1.638 million daily barrels (24 thousand more barrels than what was recorded in February). PEMEX`s production represents 97.1% of the country`s total production, while private companies provide the rest. The increase in production could stop towards May, when the new OPEC+ agreement comes into force, one in which Mexico has committed itself to reducing production in 100 thousand daily barrels up until June. Additionally, to face the drop in oil prices, PEMEX and the Ministry of Finance and Public Credit have announced budgetary adjustment measures and aid – this implies releasing up to 4,700 million dollars for PEMEX. At the moment, PEMEX has decided to prioritize high-return investments and has reduced its investment budget in 40,500 million pesos this year.

Consumer confidence deteriorates in advanced economies

Measures regarding consumer sentiment in Europe and the United States fell drastically in April as a result of unemployment and uncertainty that COVID-19 brought along with it. In Europe, the consumer confidence indicator fell to its lowest level since 2009 (-22.7). Expectations concerning employment have been substantially reduced, which has made consumers make less purchases, the survey reveals. People are worried about the general economy as well as their financial situation. In the United States, the consumer confidence indicator, the Conference Board, fell to 86.9 (vs 118.8 Mar), its lowest level since 2014. The biggest meltdown was recorded regarding the perception of current conditions, which reflect a contraction in economic activity and a rise in unemployment. Nevertheless, the future`s outlook improved slightly, as now there are talks about reopening the economy.