The Day at a Glance | August 6 2020

The Top

· Small chance of a fiscal agreement in the US this week.

· A contraction regarding consumption and investment in Mexico is confirmed in May.

· Surprising recovery in Germany`s industrial sector: manufacturing orders grow 27.9% in June (10.1% e.).

· Economic indicators: Jobless claims slowed down to 1.19M (16.1M total), figures below estimates; meanwhile in Japan a recovery in household consumption is expected to occur.

Economic environment

No signs that the White House, Republicans and Democrats have successfully resolved differences to approve a new fiscal package in the United States this week, once the main unemployment aid programs came to an end last week. The involved parties haven’t reached an agreement concerning fundamental aspects, and even though they haven’t left the negotiation tables, it seems unlikely that they will reach an understanding this week. Secretary Treasury Steven Mnuchin assured that they are still ambitious to reach an agreement this week, even though they still don’t find any common ground that will allow this to occur. Nancy Pelosi, Speaker of the House of Representatives, assured that she “sees the light at the end of the tunnel”, but it could take more time to achieve results. According to statements made by members of the White House, President Trump is ready to sign executive orders that will allow unemployment aid to be extended, as well as suspending student loan fees and lengthening the moratorium to avoid people being evicted from their homes due to them falling behind on rent payments. The resources would have to come from redirecting up to $2 trillion dollars that have still not been used after the last fiscal package`s approval. The most recent figures in the United States have shown a slowdown concerning new jobless claims received by the government (1.16M vs 1.43M prev.), which suggests that there has still not been a greater deterioration in the labor market after two weeks of increases. Nevertheless, this does not seem satisfactory for politicians as the fiscal support is still essential for recovery.

Consumption and investment contracted more deeply in Mexico during May – in line with market expectations. Private consumption contracted (-) 1.7% in May (-23.5% annual), with a larger impact regarding the consumption of imported goods (-6.7% monthly, -33.8% annual) over domestic goods (-1.4% monthly, -22.4% annual). Investment, on its part, contracted (-) 4.5% in May (-38.4% annual) as construction contracted more moderately (-0.5% monthly, -33.1% annual), but a deeper setback was seen in investment in machinery and equipment (-9.5% monthly, -43.8% annual). Nevertheless, figures set close to estimates and maintain expectations of a recovery since June, even though this will less marked in the export sector.