The Day at a Glance | May 24 2021

The Top

*Inflation in Mexico once again exceeded estimates during the first half of May.

*China warns that it will not tolerate more speculation on industrial metal prices nor the hoarding of materials, which has caused a rise in prices for producers in recent months.

*Biden`s proposal to increase the corporate tax and the capital gains tax finds strong opposition in Congress; it could decrease the size of the adjustment.

Economic environment

Inflationary pressures in the Mexican economy persisted through the first weeks of May. The consumer price index in Mexico practically didn`t record any changes during the first fifteen days of May (-0.01% biweekly) despite the fact that forecasts expected a -0.14% drop in prices during the period. At an annual rate, inflation slightly decelerated to 5.8% as the effects of a low base comparison thin down. Energy prices continued to fall for a third consecutive fortnight (-3.72%), with the implementation of subsidy programs that provided aid for electric bills in 11 cities in the country. Nevertheless, the underlying component continued to show upwards pressures on prices, which could keep concerns of more persistent than expected inflation high. Underlying inflation increased 0.33% during the first half of May – double what was estimated (vs 0.16% e.), as the prices of goods (0.42%) increased more than in services (0.23%). At an annual rate, underlying inflation accelerated to 4.22%, one of the highest levels since 2017. The persistence of high underlying inflation is one of the main inflationary risks that is monitored by Mexico`s Central Bank, which is likely to maintain a cautious stance throughout the rest of the year.