The Day at a Glance | January 26 2023

*Mexico´s unemployment rate decreased to an all-time low in December.

*US GDP surprised to the upside in the 4Q22.

*The Central Bank of Canada increased its reference rate in 25bp to a 15-year high (4.5%); it stated that it will not carry out additional increases and is the first central bank to pause its increasing rates cycle. 

*After Germany´s decision to provide Ukraine with Leopard tanks – which Russia described as a dangerous provocation as the tanks are categorized as attack-type equipment, rather than defense – now, the US announced it´s sending 31 Abrams tanks to Ukraine. President Biden said this is not “an offensive threat to Russia”.

*Republican legislators in the lower chamber called for spending negotiations as part of any agreement regarding the debt ceiling. With this, the House of Representatives majority leader, Kevin McCarthy, will meet with President Biden to discuss said issue. 

Economic environment

According to the National Occupancy and Employment Survey, Mexico´s unemployment rate set at 2.76%, its lowest level since current records exist (2005). At the end of 2022, the Economically Active Population (EAP) reached 59.6 million people, an increase of 579 thousand with respect to what was logged in December of 2021; and a participation rate of 59.7%, slightly above the 59.5% logged the previous year. With this, there were 57.9 million employed people in December, approximately 1 million more than in the same period of year prior. Additionally, the rate of underemployment set at 7.3% of the employed population, equivalent to 4.2 million people. Lastly, the Non-Economically Active Population (NEAP) increased in 94 thousand, closing 2022 at 40.2 million people.

The US economy logged a 2.9% quarterly annualized rate of growth in the 4Q22. Even though the leading estimate set above the 2.6% expected by the consensus, it confirmed a slowdown in the economy´s growth in the last quarter of 2022, which had recorded a 3.2% figure in the 3Q22. This upwards surprise could modify opinions within the Federal Reserve´s Open Market Committee, which had started to lean towards a less restrictive stance in the last few weeks as members have favored a 25bp increase in its next decision. However, they could still consider a 50bp increase in its meeting scheduled to take place next week and would take the funding rate to 5.0%. However, private consumption, the US economy´s largest component, increased at a slower pace than expected (2.1% vs 2.9%e.). It also set below the previously recorded 2.3%. Lastly, the GDP´s price index logged a 3.5% increase in the last quarter of 2022, slowing down from the previous 4.4%, although it set above estimates that forecasted a 3.2% figure.