The Day at a Glance | April 29 2022

The Top

*Mexico`s economy grew slightly less than expected in the 1Q22 (0.9% quarterly; 1.6% annual).

*Inflation in Europe once again logged a record level in April (7.5% annual) and put pressure on the ECB; underlying inflation increased to 3.5%.

*Slow growth was logged in Europe in the 1Q22 (0.2% quarterly; 5% annual) due to the war in Ukraine and growing inflation.

*Labor costs increased 1.4% in the United States in the 1Q22, a sign of persistent, upwards pressures on wages.

*PCE inflation in the U.S. reached an annual 6.6% in March (5.2% underlying); consumption increased 1.1% in the month.

*The dollar continues to appreciate against all advanced economies` currencies and reached its highest level since 2002.

*Germany affirmed that it will not block its oil embargo on Russia if the European Union decides to increase sanctions on Moscow.

*Chinese Politburo is committed to reinforcing economic stimulus and reaching its 5.5% growth target this year.

Economic environment

Mexico`s economy grew in the 1Q22. According to Mexico`s timely GDP figures made public by the INEGI this morning, the economy increased with respect to the end of 2021 and logged a 0.9% quarterly rate of growth in the 1Q22. Growth barely set below estimates (1.1%e.), and set at an annual 1.6%. Quarter over quarter, primary activities were the only ones to log a setback (-1.9%), while tertiary and secondary activities grew 1.1%. At an annual rate, all of the economy`s sectors grew, with services and trade (tertiary) logging a slower rate of expansion (0.6%) and a better performance was seen in the industrial (2.8%) and primary sectors (2.1%). This is the fourth consecutive quarter of economic expansion for Mexico`s economy, which confirms a good start in 2022 despite the virus`s wave, which impacted the country in January-February. Nevertheless, growth continues being slow and faces important challenges ahead. The analysts’ consensus has recently decreased its growth estimates to 1.8% for 2022.

Slow growth, high inflation in Europe. Europe`s GDP figures for the 1Q22 confirmed a slow rate of growth by recording a 0.2% quarterly expansion. Annual growth set at 5% and was boosted by a low base comparison in 2021. The data confirms a weak start to 2022 in the economic block and reflects the negative effects of increasing prices (particularly energy) and the consequences triggered by the war in Ukraine. By country, Italy logged a contraction (-0.2% q/q), Spain grew less than expected (0.3% q/q), Germany barely avoided entering a recession (0.2%) and France logged stagnation (0%). Slow growth was paired with persistent inflationary pressures. The Consumer Price Index increased 7.5% in April and reached a new record by exceeding the 7.4% logged in March. Underlying inflation stands out as it also reached a new record (3.5% annual). Energy is behind most of the inflationary pressures, but the increase in other commodities and services put pressure on the ECB for it to withdraw monetary stimulus and start the rise in rates in the second half of the year; even despite the consequences it has on growth.