The Day at a Glance | January 31 2022

The Top

*China`s economy continued slowing down in January.

*Mexico`s economy receded for a second consecutive quarter (-0.1% quarterly), marking a recession.

*Raphael Bostic, from the Atlanta FED, said that the FED could opt for a 50bp interest rate increase in March, if necessary.

*Inflationary figures in Europe surprised to the upside during January (5.1% Germany; 6.1% Spain); said figures raise doubts concerning the ECB`s forecasts.

*Russia increased military presence on border with Ukraine during the weekend; U.S. Senate prepares sanctions.

Economic environment

The slowdown in China persists. According to official PMI`s, China`s economy continued to slowdown in the first month of 2022 after the manufacturing and services sectors logged drops in activity during January. Manufacturing activities practically remained stagnant (50.1), while activity in services slowed down in light of continued COVID-19 outbreaks (51.1). Moreover, other indicators seek to measure activity among small and medium sized businesses showed a contraction in manufacturing (49.1), the lowest level of activity in the last two years when the pandemic began. The services sector, for its part, fell to its lowest level since August (50.3). Data suggests that recent monetary and fiscal stimulus has still not impacted the economy. Additionally, the start of the New Lunar Year could have decreased activity – like it occurs every year – as well as orders on behalf of authorities to decrease the production of steel and reduce pollution as the Winter Olympics will take place in February. Travel restrictions and some quarantine measures have decreased the consumption of services. No immediate improvement is expected to occur in February as New Lunar Year celebrations will keep being disrupted by production figures.

Mexico`s economy entered a recession. According to timely GDP figures for the 4Q21 made public by the INEGI, Mexico`s economy receded (-) 0.1% (vs. 0.3%e.), which would confirm two consecutive quarters in which contractions were logged; this means that Mexico entered a recession at the end of 2021. During the quarter, services recorded the worst performance (-0.7%), while industrial (0.4%) and primary activities (0.3%) logged moderate growth. At an annual rate, growth set at 1% in the 4Q21 and at 5% for the entirety of 2021; the largest recovery was seen in secondary activities (6.8%), followed by tertiary (4.2%) and primary (2.7%) activities. Mexico`s economy, like Brazil`s, became the second Latin-American country to log a technical recession (two consecutive quarters in which a contraction was logged in GDP), a measure that reveals that there are production chain disruptions, new waves of the virus, high inflation, and the lack of fiscal stimulus that limits recovery.