The Day at a Glance | January 28 2022

The Top

*Inflation in the United States – measured by the Personal Consumption Expenditures price index – set at 5.8% in 2021.

*Germany`s economy receded (-) 0.7% in the 4Q21, more than twice what was estimated (-0.3%e.).

*Europe, the U.K., and the United States plan to carry out sanctions on Russia`s energy sector in case it invades Ukraine.

*Crude oil production in PEMEX increased 2.9% in 2021 and set at 1,757 million daily barrels, slightly below its target level.

*International trade increased 2% in November: CPB.

Economic environment

Inflationary data in the United States. This morning inflationary data was made public in the United States through the Personal Consumption Expenditures price index (PCE); it set at an annual 5.8% rate in December (0.4% monthly). Underlying inflation set at 4.9% annual and logged a monthly increase that set in line with estimates (0.5%). Like the Consumer Price Index, both indicators are at their highest levels in 4 decades. However, complementary indicators on wages showed a slowdown in the 4Q21 with respect to the previous quarter, after recording a 1% increase in employment costs (vs 1.2%e.) and a 0.9% rise in worker benefits. During a press conference held a few days ago, Jerome Powell said for the first time that the FED is concerned about increasing wages. However, the cost-benefit data for workers didn’t show great acceleration in the 4Q21, a slight relief as the FED tries to fight off risks of persistent inflation. As for consumption, private spending receded (-) 0.6% monthly in December, in line with the weakness that was hinted at by retail sales at the end of 2021 (real consumption -1%). This is consistent with a moderate increase in income during the month (0.3% vs 0.5%e.), its lowest reading in the last 3 months. It`s estimated that inflation will gradually decrease in 2022; this could be could be reinforced if weakness in consumption and wages extends for a longer period of time and businesses stop transferring higher costs onto consumers. Additionally, growing inventories could be another factor that could contribute to lower inflation in 2022, especially if it corresponds to weaker consumption.