The Day at a Glance | May 2 2022
*Production in the European manufacturing sector became stagnant in April.
*China`s economy receded in April due to quarantine measures implemented in the country (Composite PMI 42.7).
*Inflation could increase more than central banks expect and affect estimates: Kenji Okamura, IMF.
*Budgetary revenue increased 2.2% for Mexico`s government in the 1Q22 despite a decrease in IEPS (-38.4%) and Value Added Tax (-9.3%) revenue.
*Confidence in the economy dropped to its lowest level in a year.
*Economic indicators: The U.S. manufacturing ISM will be made known for April (57.6e. vs 57.1 prev.).
Slowdown in Europe. The block`s manufacturing PMI continued to show signs of a slowdown during April (55.5) because of a decrease in production due to businesses having problems in obtaining raw materials and facing slower demand – because of growing inflation and concerns about the region`s economic outlook. The production sub index practically became stagnant during the month (50.7) and reached its lowest level since June of 2020; while overall activity (including demand and employment) increased at its slowest pace in 15 months. Weakness in the sector is a consequence of the economic impact caused by Russia`s invasion of Ukraine and new quarantine measures in China, which have worsened bottlenecks in production chains and limit production capacity among European factories. Additionally, input prices have increased at their fastest pace since the survey`s been carried out and businesses are transferring those costs onto final goods, which points out that inflationary pressures in the block remain in place.
Economic downturn in China. China`s official PMI`s confirmed a deeper economic contraction during April as a result of quarantine measures implemented in the country. Activity in the services (41.9) and manufacturing (47.4) sectors receded and set at their lowest levels since February of 2020. Delays in deliveries increased to their highest levels in two years and confirmed persistent issues in production chains that could impact inflation at a global level. Weakness in the economy could extend throughout the 2Q22 as quarantine measures are expected to remain in place or extend to other regions, which would cause economic activity to be intermittent. Ultimately, growth in the 2Q22 could be negative if the government maintains a zero tolerance policy towards COVID-19 outbreaks. On top of this, there is weakness in new export orders, which have also been receding and are at their lowest level in almost two years.