The Day at a Glance | July 5 2023

*Private consumption in Mexico recorded slight deterioration during April. 

*Gross fixed investment fell in April, dragged down by construction. 

*Consumer confidence in Mexico reached a seven-month high in June with a 46.3 point figure. The monthly 0.8 point increase was boosted by improvements in four out of five categories. 

*The Caixin PMI for China´s services sector disappointed by dropping to 53.9 points (-3.2) in June, its lowest reading since January, due to a weakening in the new orders category. As a result, the composite index also retreated to its lowest level in the past five months at 52.5 points (-3.1). 

*Producer inflation in the Eurozone experienced a larger than expected contraction in both monthly and annual rates in May, with -1.9% and -1.5% readings, respectively. 

*Today at 12:00pm Mexico City time, the Federal Reserve will release its June 14th monetary meeting minutes. 

Economic environment

Private consumption in Mexico recorded its highest reading in the past three months. April´s reading stood at 3.52% y/y, marking the highest figure since January of this year after accelerating its monthly growth rate to 0.54% from March´s 0.29%. This increased momentum in consumption was exclusively driven by the services sub-category, which increased by 1.0% month to month (the highest reading this year), leading to a 0.35% monthly rebound in goods and services of domestic origin, following a -0.12% monthly decline in March. On the other hand, the category of goods of imported origin slowed down to 2.76% m/m from the previous 3.68% m/m. Annual readings showed a similar pattern, with goods and services of domestic origin slightly accelerating to 2.61%, boosted by a 5.22% annual expansion in services, while consumption of domestic goods remained in negative territory for the second consecutive month, with a -0.68% reading, and imported goods increasing 12.45% y/y. April´s figures showed slight improvement in the Mexican economy´s momentum, driven by consumption of services, which can be attributed – at least partly – to the Easter holiday period. Therefore, it would be wise to wait for May´s figures to confirm this change in trend. 

Gross fixed investment has linked two consecutive declining figures. On an annual basis, gross fixed investment increased 6.9% in April, down from the 11.59% figure logged in February, suggesting there is a downward trend after a monthly -0.25% decline. This monthly drop was caused by a -2.15% setback in construction, which was not offset by the 2.25% increase in the machinery and equipment sector. More specifically, the drag on gross fixed investment came from the residential construction sector, which fell -7.46% m/m and -9.99% y/y, offsetting double-digit growth in all machinery and equipment categories on an annual basis.