The Day at a Glance | December 6 2022

The Top

*Strength in the US services sector surprised markets and may force authorities to rethink future interest rates. 

*Gross fixed investment in Mexico receded during September (-0.9% m/m; 3.3% annual); private consumption increased (0.4%m/m, 6% annual). 

*ECB Chief Economist, Philip Lane, says he is confident inflation will reach a peak, but expects greater interest rate increases.

*COVID-19 cases decreased in China for an eight consecutive day.

*Fitch expects 1.4% growth in Mexico in 2023, boosted by consumption and “nearshoring”.

*Trade balance figures in China will be made public tonight, estimates forecast a greater setback in exports and imports.

Economic environment

Improvement in the services sector in November.  According to surveys carried out by the Institute of Supply Management (ISM) in the United States, there was acceleration in activity during November, contrary to expectations of a slowdown. Employment in the sector rebounded strongly (51.5) and the business activity sub-index reached its highest level in 8 months (64.7), sign of a strong US economy. The aggregate services sector ISM increased to 56.5, against estimates of a 53.3 figure. 13 of 16 observed sectors expanded during the month; analysts attributed this rebound in activity to the start of the holiday season in November. Additionally, a transition in consumption is still being seen from goods to services, which keeps boosting activity in the sector. Strong numbers are raising doubts on market expectations of a pause in the FED´s increasing rates cycle as the central bank may have to maintain the increasing rates cycle for a longer period of time and the terminal rate could be higher than expected as the labor market is strong and demand in the services sector is steady (the largest in the US economy). Strength in the economy has also led some to believe that the recession in 2023 will be light – some think that the economy may avoid a recession altogether, even though the FED will likely carry out aggressive interest rate increases.