The Day at a Glance | March 31 2022

The Top

*China´s economy receded in March; this is the first time that activity decreased since 2020.

*In the United States, consumption adjusted for inflation receded in February (-) 0.4%; PCE inflation set at a 6.4% annual rate.

*The U.S. considers releasing 180 million barrels of oil from its strategic reserve to counter high prices.

*OPEC+ ratifies a plan to gradually increase production; it will add 430 thousand daily barrels in May.

*IEPS collection through gasoline fell 60.5% at an annual rate in January-February, after an increase in fiscal stimulus in Mexico.

*High oil prices could reduce transfers to PEMEX on behalf of the Mexican government: Fitch.

*Russia accepts Euros for natural gas transactions with Europe, Putin assures.

Economic environment

Weak Chinese economy. PMI´s for China´s economy logged a decrease in the manufacturing sector (49.5) as well as in services (48.4) during March. This is the first time that both sectors recede simultaneously since the start of the pandemic in 2020; and the Composite PMI (48.8) set at its second lowest level since February of 2020. In other words, the economy shrunk at its fastest rate since the start of the pandemic. The data reflects the impact that the virus´s new wave had on the country – as well as the measures imposed by the government in efforts to contain the virus´s effects. Production and mobility have been limited in important cities such as Shanghai and Shenzhen during March in light of concerns of a rise in COVID-19 cases. Geopolitical instability also contributed to the contraction in economic activity during the period, as it affected Chinese production, according to Zhao Qinghe, of the National Statistics Office. The conflict in Ukraine led to decreases or even order purchase cancelations. Nevertheless, the largest impact came from mitigation measures as various businesses partially or completely halted production in light of government-imposed restrictions. For example, in Shanghai, quarantine measures decreased automobile production with a total halt in factories like Tesla and at least two of its suppliers. Considering that quarantine measures were imposed at the end of March, disruptions are expected to continue through the start of April. In the services sector, demand was directly affected by confinements and there are concerns that weakness will also extend into April. Authorities have reiterated that they will implement policies in order to reduce the impact that restrictions will have on the economy as soon as possible. The central bank is expected to cut interest rates as well as capital requirements for the banking sector.