The Day at a Glance | December 7 2022

*Chinese import and exports receded more than expected, reinforcing fears of a global recession.

*Democrats gain majority in the Senate after a win in Georgia.

*Mexican auto exports decreased 3.8% and production increased 8% in November.

*COVID measures in China continue softening: Isolation at home is now more common, mandatory testing eased and vaccination efforts have doubled.

*US mortgage rates decreased to 6.41% for a fourth consecutive week.

*European GDP slightly increased in the 3Q22 to 2.3% annual.

*Members of China`s Politburo set a 5% GDP growth target for 2023, this suggests there will be economic stimulus.

Economic environment

Slow growth. China`s most recent trade balance figures surprised to the downside and revealed weakness in global and local demand in the world`s largest economy. Exports receded (-) 8.7% annual during November, much more than the (-) 3.6% expected by analysts; while imports decreased (-) 10.6% annual, doubling expectations of a -5%e. decrease. As a result, China`s trade surplus was smaller than expected (69 billion dollars; vs 79 billion dollars e.). The contraction in exports was the largest since February of 2020, when trade came to a halt because of the pandemic. The decrease in exports showed up in a moment in which China`s exports tend to increase considerably due to festivities around the world. Weakness in data reflects demand is in a poor state – and there are persistent disruptions in production due to recent COVID outbreaks in the country. Weakness is expected to last for the next few months as the world is affected by high interest rates and inflation. On the other hand, the slowdown in imports is bad news for China`s domestic market, which was affected by the government`s policies against COVID-19  in November. In the last few weeks, China`s government has started to ease restrictions after aggressive protests took place. China shows intentions of moving towards a state of “cohabitation” with the virus, like the rest of the world has done. Authorities have started to change their focus, not only in terms of public health, but also economically. There have been rumors stating that some members of the Politburo are advocating in favor of setting a high growth target for 2023, with the intention of allowing local governments to start focusing on developing economic stimulus that will lead towards a recovery. At the moment, China is forecasted to grow at a 3% pace in 2022; and for 2023, weak foreign demand will prevent exports from being China`s growth driver, which is why its recovery will fully depend on its domestic market.