The Day at a Glance | January 11 2023

*Industrial production became stagnant in November due to a monthly drop in manufacturing activities and mining.

*The World Bank cut its growth estimates for 2023 and warned of vulnerable conditions that could lead the global economy towards a recession.

*Chair of the FED, Jerome Powell, stated that stability in prices requires making difficult decisions that could be politically unpopular; he also emphasized that the FED should be free of political influence. 

*Mario Centeno, member of the European Central Bank, informed Portuguese legislators that the ECB`s increasing rates cycle is approaching its end.

*In the second day of the North American Leaders Summit, it was announced that the region will seek to strengthen the semiconductor industry.

*Retail sales inventories in the United States increased 1.0% in December, exceeding the consensus` initial estimate and logged weakness in demand. At an annual rate, inventories logged a 20.9% increase. 

*Mortgage applications increased 1.2% on January 6th, according to MBA figures.

Economic environment

Industrial production logged monthly stagnation in November. In a disaggregate manner, mining and manufacturing activities both logged -0.5% contractions, cancelling out the progress that had been made in construction (0.7%) and in the generation and distribution of electric power, supply of water and gas (0.4%); with which industrial production logged monthly stagnation (0%) with respect to October. However, at an annual rate – and being mostly boosted by a low base comparison – industrial production increased 3.2%. Mining was the only component that recorded a negative figure (-0.5%); electrical power generation and distribution, along with water and gas supply increased 5.2% annually; construction hiked 1.8%. However, the three subsectors are still below pre-pandemic levels. For their part, manufacturing industries, which already surpassed pre-pandemic levels long ago, now logged a more moderate annual increase (4.6%).

Global growth will go through an alarming slowdown in 2023, according to the World Bank, which cut its forecast to 1.7%. This scenario is explained by the combination of disruptions caused by Russia`s invasion of Ukraine; a rapid tightening in monetary policies to fight off inflation; and a deterioration in monetary conditions. With this context, the US, Eurozone and China are expected to go through a period of weakness, with possible negative repercussions on the rest of the emerging and developed countries; and in light of additional shocks, this could lead the global economy towards a recession. With this, 95% of advanced economies and 70% of emerging economies` growth estimates were revised downwards for 2023. Forecasts for Mexico set at 0.9% (-1.0pp) for 2023 and 2.3% (+0.3pp) for 2024; while for the United States, growth forecasts were cut for both years, to 0.5% (-1.9pp) and 1.6% (-0.4pp), respectively.