The Day at a Glance | August 26 2020

The Top

· OECD estimates a 10% contraction in the global economy in the 2Q20; four times what was observed in the 2009 recession.

· Contraction in Mexico`s GDP in the 2Q20 is slightly revised upwards; 18.7% annual (vs 18.9% prev.).

· Further cuts to interest rates cannot be guaranteed, given the recent inflationary pressures: Javier Guzmán, Banxico`s Deputy Governor.

· The FED is expected to keep interest rates low in the next 5 years if it takes on a monetary strategy that allows higher inflation.

Economic environment

INEGI published Mexico`s final GDP figures in the 2Q20, with them being revised slightly upwards. The economy contracted at a (-) 17.1% real rate during the quarter, and contracted at a (-) 18.1% annual rate. The largest contractions in activity occurred in the industrial sector (-23.4% quarterly; -25.7% annual) and in services (-15.1% q.; -16.2% a.). The figures were revised after the IGAE`s June publishing, which showed an 8.9% recovery in the economy during the month to set itself at (-) 14.5% with respect to 2019. Agricultural activities were the only ones that did not recover during the month (-4.5% vs 17.9% in the industry and 6.2% in services). The industry`s strength reflects greater vibrancy in the external market, which shows a greater recovery than the internal market (services). The contraction recorded in the first six months of 2020 was (-) 10.4%, with recreational, cultural and sporting events (-46.7%), temporary accommodation and food and beverages (-39.6%) and construction (-20%) as the sectors most affected by the pandemic in the first semester of 2020.