The Day at a Glance | July 12 2023

*Inflation in the US surprised to the downside in its June reading, reaching its lowest level in 27 months.

*Industrial production in Mexico strengthened during May, recording its highest annual change since August of last year.

*US Treasury Secretary Janet Yellen raises hopes of cutting tariffs on Chinese imports from the Trump era.

*NATO allies offer security guarantees to Ukraine.

*Stress tests by the Bank of England show that the UK’s 8 major banks have sufficient capital.

Economic environment

Both general and core inflation in the US decreased and fell below market estimates. During June, consumer inflation in the US logged a 3.0% annual figure, lower than the 3.1% forecasted by consensus analysts and down from a previous 4.0%, marking the lowest level since March 2021. Perhaps even more significant than this is the progress shown by the core component, which surprised on the downside for the first time this year, moderating from its previous reading by -0.5 percentage points, representing its largest negative change since April 2020, and setting at 4.8%, which is also the lowest reading since October 2021. On a monthly basis, general inflation increased 0.2%, lower than the 0.3% forecasted by analysts but higher than May´s figure (0.1% m/m), driven by an increase in energy prices and partially offset by moderation in food prices. Meanwhile, core inflation slowed down to 0.2% m/m from the previous 0.4% m/m, with housing prices showing moderation at a rate of 0.4% m/m compared to the previous reading of 0.6%. With this, inflation in the US continues to trend downward, which is good news, especially considering improvements seen in the core component. However, this data is unlikely to stop the FED from raising rates once again in its upcoming meeting.

Mexico’s industrial production (IP) figures surprised to the upside with a strong rebound in May. On an annual basis, and based on the original series, IP logged an annual 3.9% figure, nearly double the consensus estimate of 1.6% and an improvement from the previous reading (0.7%); it was boosted by improvements among all its components. However, when considering the adjusted figures, although the overall trend remains the same, the numbers show more moderate changes, with an annual growth of 2.81%, reflecting a significant slowdown in the manufacturing industries, which recorded a reading of 0.32% y/y (vs 3.16% prev.). Nevertheless, mining and construction showed robust progress (5.08% and 8.13% y/y, respectively). While this data is positive, manufacturing (the main component of IP) is finally weakening, which could set the trend for the second half of the year.