The Day at a Glance | December 8 2022

*Inflation in Mexico decreased more than expected in November.

*Xi Jinping visits Saudi Arabia with intention of signing agreements on infrastructure, energy and telecommunications investments.

*The Netherlands considers restricting technology exports to China in agreement with the United States.

*Peru has a new President after Pedro Castillo´s arrest.

*There are fears of a possible increase in COVID cases as China winds down restrictions.

*Putin believes that risks of a nuclear conflict are still in place.

*China takes over Russia´s automotive market after exodus of Western companies.

*China´s inflationary figures will be made public tonight (1.6%e.).

Economic environment

Inflation decreased. According to figures made public by the INEGI this morning, inflation continued decreasing during November. The Consumer Price Index increased 0.58% monthly (vs 0.69%e.) and set at 7.8% annual (vs 7.92%e.), its lowest level since May of 2022. Both figures set below estimates and pointed out inflationary pressures have been more moderate than expected, even though part of this is attributed to a high base comparison and one-time events. There was also a downwards surprise at an underlying level, with a lower than estimated annual acceleration. Month to month, the underlying component increased 0.45% (vs 0.49%e.) and set at an 8.51% annual rate (8.59%e.). The slowest core inflation increase since November was logged, in part because of lower non-food prices, which usually log a decrease during the discount season. Foods logged an 0.65% monthly increase. Regarding services, inflation accelerated and hiked 0.48% monthly (5.35% annual) and the main component during the month was core inflation, led by food service prices (0.83%), airfares (10.42%) and professional services (10.94%). At a non-core level, energy also contributed to an increase in prices after recording a 2.88% monthly increase; while agricultural goods logged a (-) 0.42% contraction in prices. The general decrease in inflation is good news, but shouldn’t be considered too important in an atypical month such as November while the base comparison is also an important factor when observing annual figures. December´s data could give a clearer view concerning the trend in inflation. However, it´s important to point out that services prices increased, a factor that could derail the current expected downwards inflationary trend for 2023 if it continues.

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