The Day at a Glance | July 17 2023

*China´s economy expanded at a slower than expected pace during the 2Q23.

*Industrial production in China closed the second quarter on a strong note, logging a 4.4% annual increase in June, up from May’s 3.5% and surpassing the market expectation of 2.7% y/y. In contrast, retail sales recorded a year-on-year 3.1% hike in June, slightly lower than the consensus estimate of 3.2% y/y and a logged a slowdown from the previous reading (12.7% y/y).

*The INEGI´s Timely Index of Private Consumption estimates a 1.9% annual increase in private consumption in Mexico during May, followed by a slight acceleration in June, closing the quarter with a 2.2% y/y rate of growth.

*In the U.S., the Federal Reserve Bank of New York’s manufacturing index, known as the “Empire State,” dropped 5.5 points in its reading for July, setting at 1.1 points, higher than the market’s expected -3.5.

*An important agreement that allowed Ukraine to export grains and stabilize global food prices has been terminated. Moscow has denied that this termination is related to an airstrike carried out on a bridge in Crimea.

Economic environment

China’s GDP logged an annual 6.3% growth rate in the 2Q23. Although this reading is higher than the 4.5% y/y reported in the previous quarter, the focus was on the fact that this growth fell short of the 7.1% y/y forecasted by the consensus. Additionally, on a quarterly basis, a 0.8% q/q figure was recorded, up from a 2.2% q/q in the 1Q23. While it still remained in expansionary territory for a fourth consecutive quarter, it shows a loss in momentum. It’s important to keep in mind that these figures still show some distortion because the Chinese government maintained strict anti-COVID controls a year ago, which is why there was a low comparison base. Judging by these GDP figures, the need to implement counter-cyclical policies becomes evident; some were announced by the Deputy Governor of the People’s Bank of China, Liu Guoqiang, last week.