The Day at a Glance | Aug 10 2022

The Top

*Inflation in the US slowed down more than expected (8.5% annual vs 8.7%e.), including underlying inflation (5.9% annual vs 6.1%e.).

*Productivity in the US fell for a second consecutive quarter (-4.6% annual 2Q22), labor costs increased 10.8% quarterly.

*Income due to tourist expenses in Mexico increased 20.2% annual in June.

*The Popular Bank of China warned about inflationary risks and the need to avoid aggressive stimulus in the economy after inflation reached 2.7% annual in July.

*Liz Truss, UK Prime Minister candidate, proposed changing a mandate in the Central Bank of England and dropping the inflationary target.

*Biden signs law that considers subsidizing production of semiconductors in the US.

*China concludes military exercises on the border with Taiwan.

Economic environment

Inflation in the United States reached its peak. The most recent data made known by the Labor Statistics Bureau showed a stronger than expected slowdown in inflation during July; it logged an 8.5% annual increase (0% monthly) in overall prices in the economy. Energy (-4.6% monthly) and, especially gasolines (-7.6%) contributed greatly to the slowdown in inflation. Although there were clear decreases in underlying inflation, a sign that inflationary pressures have become more moderate. Underlying inflation merely increased 0.3% during the month, its slowest monthly increase in 4 months, and at an annual rate, it remained at 5.9%, against expectations of seeing a 6.1% figure. Commodities (0.2%) and services (0.4%) slowed down with respect to previous months, with decreases logged in used automobiles (-0.4%) and transportation services (-0.5%). Housing prices increased more moderately and logged a 0.5% monthly hike, although they remain at historically high levels; while food prices continued to increase (1.1%). The data is quite positive and has revived appetite for risk among markets. The inflationary report now backs a scenario of a slowdown in inflation, which allows the FED to carry out more moderate interest rate increases. However, it`ll be important for this trend to continue for several months before inflationary risks can no longer be considered a threat.