The Day at a Glance | April 5 2023

*Inflation continued slowing down in March and logged its lowest level since October 2021; the core component also improved.  

*Iberdrola sells its assets to Mexico`s government. 

*The INEGI reported that Private Consumption accelerated in January. 

*Gross Fixed Investment fell short of consensus estimates but continued to expand at a high rate. 

*In the US, the ADP private sector employment report indicated that 145,000 jobs were created during March, significantly lower than both the previous figure of 242,000 and the estimated 210,000. 

*The US trade balance concluded February with a deficit worth $70.5 billion. 

*According to the World Trade Organization, trade between countries will slow down 1.7% in 2023. 

Economic environment

Inflation surprised positively in March, both in the monthly and annual readings. The INEGI reported that the Consumer Price Index recorded a monthly 0.27% figure – a significant slowdown with respect to the previously logged 0.56% and below the consensus estimate of 0.29%. With this, the annual reading stood at 6.85% from the previous 7.62% and lower than the estimated 6.89%. Regarding the underlying component, the monthly rate recorded a 0.52% figure, lower than the previous 0.61%, but marginally above the estimated 0.51%. Similarly, the annual reading was 8.09%, which is the lowest since August of last year, compared to the previous 8.29% and the estimated 8.07%. However, pressures on the services side continued; it increased to its highest level since February 2003 at 5.71%, which was offset by goods that slowed down to 10.12%. Lastly, non-core inflation logged its lowest reading since January 2021 at 3.27% y/y, after having fallen -0.50% m/m, driven by decreases in agricultural products (-0.67%) and energy and government tariffs (-0.36%). Overall, the inflationary reading is positive given the positive surprise, accompanied by moderation in the core component. However, the deceleration was largely driven by the non-core component, while prices in services continue to rise. 

Iberdrola sells its assets to the Mexican government. In the coming months, 13 of Iberdrola`s power plants will be transferred to the Mexican government. The transaction amount is approximately $6 billion for 12 combined cycle gas power plants and one 8,500 W wind power plant. With this agreement, the Federal Electricity Commission (CFE for its initials in Spanish) will be in charge of operating the plants, supplying 55.5% of the country`s electricity with the aim of restoring energy sovereignty in the electricity industry. This will be carried out through Mexico`s National Infrastructure Fund (Fonadin), managed by Mexico Infrastructure Partners, with financing from banks.