The Day at a Glance | June 25 2020

COVID-19 cases rise in the US

Recorded cases of COVID-19 in the United States reached a new high since the end of April, when the pandemic had reached its peak in the country. Texas, California and Florida recorded record numbers of infections while Arizona reached a new high of hospitalizations. North Carolina decided to delay its reopening for three weeks, and in States where the virus has been controlled (New York, New Jersey and Connecticut) any visitor coming from a high-risk State will be required to quarantine for 15 days. According to recent forecasts made by the University of Washington, 180 thousand people could die by October, which is 10% higher than estimates had previously anticipated. Some high frequency indicators are beginning to show deterioration in some States (e.g. restaurant reservations), and some estimates suggest that up to 30% of the economy could be forced to close down to avoid the virus from getting out of control again. This increases doubts on whether consumption could recover, as governments are not explicitly implementing stricter social distancing measures again, citizens and businesses themselves could decide to do so out of fear and caution. For Charles Evans, President of the Chicago FED, intermittent outbreaks of the virus could result in low growth and high unemployment for a longer period of time. Figures regarding initial jobless claims published this morning exceeded estimates (1.48M) and give signs of null improvement in June`s employment situation.

Mexico`s retail sales collapse in April

The first hard data that show COVID-19`s direct impacts have started to appear and don`t bring good news. Retail sales collapsed (-) 23.6% annually during April (-22.4% monthly). Figures set above estimates (-18.4% e.) and show a historical contraction in the most important component of demand. Recovery in this area could not be as good as in other countries in the following months, given the fact that social distancing measures were broadly extended throughout the country at least until the end of May and continued through June in at least half the country. Today, the country`s central bank will hold a meeting in order to make a monetary policy decision, in which a 50 bp cut is expected. Members of the Governing Board will have to assess a recent rebound in inflation, boosted mainly by energy prices and merchandise, along with the virus`s severe impact on investment and consumption. If data published in the following weeks show a deeper than estimated impact on the economy, it could be possible to see not only further cuts in growth estimates (-8% in 2020, according to the consensus), but Mexico`s Central Bank could lean towards a more accommodating stance and take interest rates to a lower level than estimated for this year (4.5% consensus), with implications of a possible depreciation regarding the exchange rate. Tomorrow, April`s IGAE will be published – monthly growth figures of the economy.