The Day at a Glance | Jul 28 2022

The Top

*The US economy receded during the 2Q22 (-0.9% annualized), linking two consecutive quarters of negative growth.

*Consumer confidence in Europe dropped to its lowest level since records exist (-27 July).

*Inflation in Germany increased to 8.5% in July.

*Unemployment in Mexico set at 3.3% annual during June.

*Russia decreased its supply of natural gas to Europe even more; Nord Stream is operating at only 20% of its capacity.

*Democrats reached an agreement for a budgetary plan that seeks to hike taxes and increase spending on energy projects, estimated at 370 billion dollars.

Economic environment

Recession in the United States? The United States Gross Domestic Product receded (-) 0.9% in the second quarter of 2022 after a slowdown in consumption and a decrease in investment. This now links two consecutive quarters of a decrease in GDP, which makes many believe that the US economy already finds itself in a recession; even though the weakness has not been reflected in key indicators such as employment. Consumption slowed down to an annualized 1% in the quarter and was affected by high prices, a decrease in real income and lower savings. Something that stands out is the fact that the consumption of goods (-4.4%) decreased while services increased (4.1%), something that suggests that consumption has normalized after the pandemic. Fixed investment receded (-) 3.9% and is the component that most affected growth, along with investment in inventories, which also decreased. Residential investment stood out as the one with the worst performance (-14%). Government consumption and investment was also negative as it logged a (-) 1.9% quarterly annualized drop; although net exports were a positive contributing factor after exports increased (18%) way more than imports (3.1%). The slowdown in consumption and the decrease in investment (excluding inventories and highlighting the residential market) reveal that the United States economy finds itself in a weakened environment – just as the FED has started to aggressively increase the interest rate. Considering that a less accommodative monetary policy doesn’t manifest itself immediately, but with a lag of approximately 6 months, it`s feared that economic weakness could worsen in the second half of the year towards 2023.