The Day at a Glance | April 30 2021

The Top

*Mexican economy grows more than expected in 1Q21 (0.4% q/q vs 0.1% e.).

*Europe fell back into a recession in the 1Q21; GDP contracts 0.6%.

*PMIs reveal that growth in China becomes more moderate.

*Inflation (PCE) in the US increases in line with estimates during March: 2.3% annual (1.8% underlying); US citizens` incomes log record growth due to fiscal stimulus.

*Inflation in Europe increased 1.6% annual; underlying inflation surprised with a 0.8% slowdown.

*Budgetary revenues increased at an annual rate of 2.8% in the 1Q21 and exceeded expectations; tax revenues fell 2% but oil revenues grew 45.6%: SHCP.

Economic environment

INEGI`s GDP estimate showed growth in the Mexican economy during the 1Q21. The economy expanded 0.4% quarter over quarter, according to the institute`s estimates, and shrunk at an annual rate of 2.9%. The greatest quarterly growth was seen in the tertiary sector (0.7%), which benefitted from the gradual reopening at the end of the quarter. Primary activities recorded contraction (-1.3%) while industrial activities recorded no changes (0%). In its annual comparison, the economy remains below last year`s levels, with services still (-) 3.6% below 2020 levels and the industry down by (-) 2.3%; the economy`s smallest sector (agribusiness) recorded growth of 2.8% annual. The figures slightly exceeded those expected by the analysts` consensus and show that the recovery has started to strengthen at the end of the year`s first three months after six consecutive quarters of recording a contractionary annual rate. Trade balance figures for March published a few days ago suggest that growth in the third month accelerated – particularly in in the domestic market – after an important rise in imports of consumption goods. Another indicator that suggests that there was improvement during March is based on government income figures, which increased 14.2% annually during said month after contracting 4.3% in the first two months of the year.

The European economy shrunk for a second consecutive quarter in the 1Q21, which confirmed a second recession in the continent. Europe shows a clear difference with respect to the United States at the start of 2021, after an economic contraction was caused by the slow rollout of vaccines and persistent shutdowns in the economy occurred. GDP contracted 0.6% in the 1Q21 after shrinking 0.7% in the 4Q20. At an annual rate, the contraction set at (-) 1.8%. Even though the contraction set slightly below estimates (-2% annual e.; -0.6% quarterly e.), Germany contracted more than expected (1.7%) and showed weakness in the manufacturing sector, while Spain (-0.5%) and Italy (-0.4%) also logged contraction. Among the main economies, only France showed moderate growth (0.2%). Nevertheless, some indicators start to show an improvement at the end of the quarter, as unemployment in the Eurozone starts to decrease during March and an important rise in retail sales in Spain was seen during the same month. The recovery is expected to resume in the 2Q21 and continue through the second half of the year, as vaccine programs continue and the European Recovery Fund backs the recovery. Additionally, inflationary data was published for April, which set at an estimated 1.6% (annual), even though underlying inflation disappointed as it decelerated to 0.8%, which confirmed the temporariness of the rise in prices, and is a sign that the ECB could still be far from reaching its objective.