The Day at a Glance | June 8 2023

*Inflation in Mexico surprised positively and fell to its lowest level since August 2021.  

*The Eurozone fell into a recession after end of year figures were revised. The final GDP figure for the 1Q23 logged a -0.1% decrease, which was also preceded by a -0.1% drop in the 4Q22. 

*New unemployment claims in the US reached 268,000 during the week ending June 3rd, significantly higher than the estimated 235,000 and the previous 232,000. Despite the surprising increase, figures remain consistent with those of a tight labor market. 

*Consumer credit in the US set at $23.01 billion in April, surpassing the expected $22.0 billion. 

*The four largest Chinese banks cut the rate for demand deposits by 5 basis points, as well as time deposits by 15 basis points on Thursday as a measure to alleviate pressure on profit margins and reduce loan costs, which would collectively provide relief to the financial sector and the economy in general. 

*China´s international reserves set at $3,176.5 billion in May, a three month low, a figure that compares unfavorably to both the previous $3,204.8 billion and the expected $3,188.0 billion. 

*After a four month pause, the Bank of Canada unexpectedly raised its benchmark interest rate to 4.75%, the highest level in 22 years, following the surge in inflation to 4.4% in April. 

Economic environment

Inflation in Mexico surprised to the downside in its monthly and annual readings. During May, the consumer price index recorded a -0.22% monthly decrease, the largest negative variation since April 2020, surpassing the consensus estimate of -0.18%. This decline was mainly driven by a -1.88% monthly drop in non-core prices, which included a -4.77% decrease in the energy subcategory, as well as a -0.79% monthly decline in livestock prices. Additionally, the core component continued slowing down for a fourth consecutive month and logged a 0.32% variation; backed by the goods category (0.35% month to month), particularly due to a moderation in non-food prices (0.14% month to month). However, the services category continues to show some pressure as it logged marginal acceleration (0.29% m/m), driven by tuition fees and other services. On the positive side, the housing subcategory recorded its lowest monthly variation (0.3%) so far this year. As a result, general inflation decreased to 5.84% annual, marking a fifth consecutive decrease. The non-core component set at 1.24% year on year and the core component set at 7.39% y/y. May´s figure is unquestionably positive; however, the factors that contributed the most to its decline mainly came from external sources, such as a fall in energy prices, while the core component continues to show high rates of variation – still far from the bank´s target.