The Day at a Glance | February 24 2022

The Top

*Russia starts a “special military operation” in Ukraine; Kiev warns of a large scale invasion.

*United States prepares new economic sanctions on Russia.

*Inflation in Mexico exceeded estimates during the first half of February (7.22% annual).

*The U.S. economy expanded at a confirmed 7% annualized rate during the 4Q21.

*Retail sales in Mexico grew less than expected in December (4.9% annual vs 6.3% e.).

Economic environment

Russia launches invasion of Ukraine. Last night, Russian President Vladimir Putin announced that he has decided to start a “special military operation” in the Donbass region in order to protect the people in the Donetsk and Lugansk Republics. Minutes later, the Ukrainian government announced that it expected a large scale invasion, with military objectives all around the country, including airports and anti-aircraft defense systems. Explosions and attacks in several of Ukraine`s cities were reported; with reports of attacks on Russia`s border with Belarus and heavy artillery advances on the border with Crimea. The Russian navy was also reported to have entered the city of Odessa, with troops crossing the border into the city of Kharkiv, and there are confrontations in the regions close to the capital, Kiev. Ukraine has declared martial law, closed its airspace for commercial flights and has called on citizens to remain at home and protect themselves in case of an attack. Cyberattacks on Ukraine`s information systems have also been reported. The United Nation`s Security Council had an emergency meeting and considered it`s too late for any de-escalation, even though UN Secretary General called on Russia to stop the attacks and withdraw its troops. U.S. President Joe Biden declared that the United States and its allies will respond in a coordinated and decisive manner. The G7 will hold a meeting today in order to decide on measures against Russia. China is against condemning the invasion and accuses the United States for escalating tensions.

Inflation in Mexico surprised to the upside. INEGI figures for the first half of February showed that inflation accelerated more than expected by recording a 0.42% biweekly increase in prices (vs 0.38%e.); at an annual rate, inflation accelerated to 7.22%. Underlying inflation also surprised to the upside with a 0.43% biweekly increase (vs 0.31%e.) and accelerated to a 6.52% annual rate. The largest rise in the general price index is still being seen in commodities, which increased 0.56% during the two week period (led by non-food goods, 0.6%). Services increased more moderately (0.26%). Regarding underlying inflation, energy prices contributed most to the increase in inflation (0.96% biweekly), while agricultural goods decreased (-0.1%). The data confirms the fact that inflation didn’t decrease during the first months of 2022 and suggests that Mexico`s Central Bank will have to maintain and reinforce its restrictive monetary stance in order to have inflation meet its target level.