The Day at a Glance | June 5 2020

Positive surprise regarding US employment data

According to figures published by the Labor Department, 2.5M jobs were created in May – figure dramatically opposite to the 8M estimated contraction. Data suggest greater resilience in the US labor market than first anticipated, particularly because of workers returning during the initial stage of the economy`s reopening. With this, the rate of unemployment slowed down to 13.3% (vs 14.7% prev.), outperforming estimates of a rise to 19.7%. Salaries also moderated their growth to 6.7% annual, which points to a possible recovery in employment in the lower levels of wages. Figures back up positive expectations of a fast recovery, which have poured into markets in recent days. The temporality of unemployment seems to have been confirmed by May`s data, and if a rebound is confirmed in the following months optimism recovery expectations could strengthen as figures would suggest a similar rebound in confidence and consumption, given the increasing income among American families in recent months due to the fiscal aid carried out.

Weak consumption in Mexico since March

INEGI figures confirm a third monthly contraction in private consumption (at an annual rate) in March of this year. Consumption contracted an annual (-) 2.8% (-2.4% monthly) in the first month that social distancing measures were implemented in the country. This is the largest monthly contraction in consumption since 2009, with expectations of this phenomenon forecasting to worsen in April and May, months during which social distancing measure were carried out thoroughly. What stands out is the fact that regarding the indicator`s components, only the consumption of domestic goods recorded an expansion (0.4% monthly, 1.1% annual), while domestic services (-5.7%) like the consumption of imported goods (-8.6%) contracted sharply. Recently published figures concerning the trade balance suggest that the consumption of imported goods` contractive tendency accelerated in April. As for investment, published figures point to a (-) 11.1% annual contraction in March and 14 consecutive months have now recorded contractions. Investment in construction slowed down its downward trend (-6.9% annual Mar vs -8.2% Feb) because of the investment in residential construction, but has continued to contract for more than a year.

PBOC will back up Hong Kong as a global financial center

The People`s Bank of China, the country`s monetary authority, assured in a statement released this morning that it will without a doubt back up Hong Kong`s role as an important financial center at a global level and that it will work to maintain its stability and prosperity. The statement was made days after the approval of stricter security measures in the autonomous city and sanctions implemented by the US to withdraw its preferential treatment. The China Insurance Regulatory Commission has also released a statement to give participants in the private sector more confidence by assuring that no substantial capital outflows have been recorded in Hong Kong and that the exchange rate remains stable. The Commission added that any law that affects the financial center`s stability and prosperity would go against the interests of international banks based in Hong Kong. Simultaneously, the PBOC and the regulatory agency both expressed their support for the security law proposed by the government.