The Day at a Glance | March 22 2023

*According to the Timely Indicator of Economic Activity (IOAE for its initials in Spanish), the Monthly Indicator of Economic Activity (IGAE) is expected to have grown by 3.3% annually in January. 

*In the 4Q22, Mexico`s overall supply of goods and services, which is equal to global demand, decreased by -0.1% compared to the previous quarter (in real terms). 

*The current account balance in the Eurozone recorded a surplus of 17.1 billion Euros in January, marking its fourth consecutive month in positive territory after seven straight months of deficits caused by energy imports due to the war. 

*In the US, sales of previously owned homes exceeded the consensus estimate of 4.2 million, with a reading of 4.58 million in February, implying a monthly 14.5% increase (vs -0.7%e.), which is the largest monthly expansion since July 2020. 

*Today at 12:00pm Mexico City time, the Federal Reserve will announce its monetary policy decision, which the futures market anticipates will result in a 25bp increase in the federal funds rate, taking it to 5.0%. 

Economic environment

The IOAE expects a 3.3% annual increase in January`s IGAE. This new estimate is 0.5pp higher than the one indicated by the IOAE a month ago, despite the final reading for the industrial sector being 2.5% annual, lower than previously expected (3.1%). With this, the upwards revision to January`s IGAE forecast comes from a higher estimate for tertiary activities, which are now expected to have hiked 3.5% annual in January – instead of the previously expected 2.5% annual. Regarding February, the IOAE expects a 3.5% annual increase in the IGAE, supported by a 2.9% increase in the industrial sector, and a 3.1% hike in the services sector. The official reading for January`s IGAE, which analysts` expect to log a 3.0% annual increase, will be made known Friday. 

This morning, the INEGI made Mexico`s 4Q22 aggregate supply and demand figures known. The report informed of a -0.1% quarterly decrease, which considers a 0.5% rate of growth in GDP, and a -2.6% quarterly contraction in imported goods and services. Exported goods and services also logged a -5.0% quarterly decrease, marking a fragile state of global demand towards the end of 2021. However, gross fixed capital formation increased 3.0% quarterly at the end of the year. With this, annual figures logged a 4.3% annual expansion in the import of goods and services. Gross fixed capital stood out with an annual 7.9% increase, partially due to a low base comparison as well as the export of goods and services, which in annual terms managed to remain in positive territory with a 0.2% figure.