The Day at a Glance | February 3 2021

The Top

· Inflation in Europe accelerates and exceeds estimates in January.

· Secretary of the Treasury Janet Yellen will have a meeting with regulators and the FED to discuss the recent volatility seen in markets caused by Reddit users.

· The Mexican manufacturing sector recorded growth after 19 months of contraction; the services sector deteriorated during January, according to the IMEF.

· Economic indicators: Non-manufacturing ISM expected to be published in the US (57.3 e.).

Economic environment

Inflation in Europe recorded a positive rate of growth in the first month of 2021. The Consumer Price Index increased an annual 0.9% during January after logging 5 consecutive months of deflation, exceeding estimates that forecasted a 0.6% rate of growth. Underlying inflation accelerated to 1.5%, its highest level in five years. The rise is explained by the reinstated value added tax in Germany, which was suspended last year in order to aid the country`s citizens through the pandemic`s economic consequences. Greater energy (3.8%) and food prices also contributed to the rise. This is good news for the European Central Bank, which will definitely maintain stimuli as the rise responds to temporary factors. Other, more decisive factors that increased inflation such as employment and wages have continued to show weakness, which suggests that the rise in prices will not be sustained in the medium term. The ECB forecasts a 1% rate of inflation for 2021 and 1.1% for 2022 after having recorded 0.2% in 2020. The central bank expects to see a very gradual recovery in prices, which will not come close to its 2% objective until after 2023.