The Day at a Glance | May 24 2022

The Top

*Inflation in Mexico became more moderate in the first half of May (7.58% annual).

*Europe´s economy slowed down more than expected in May (Composite PMI 54.9 vs 55.3e.).

*Lagarde doesn’t consider it necessary to withdraw stimulus at a fast pace  as inflation is originating from supply side issues. 

*Factories in Asia pointed out that demand for its exports at a global level has started to decrease.

*A 50bp increase in Europe is not on the table: Francois Villeroy, member of the ECB.

*Economic indicators: US PMI´s for May are expected to confirm a slowdown in the economy.

Economic environment

Inflation in Mexico became more moderate. The Consumer Price Index confirmed a slight slowdown in prices during the first half of May by logging a (-) 0.06% quarterly decline and a 7.58% annual rate, practically in line with estimates. The continuous decrease in energy prices (-3.46% biweekly) led the decrease in the non-underlying component in inflation due to the effects of subsidized electricity bills during the warm season. Agricultural goods barely increased 0.467% during the biweekly period and with it, underlying inflation recorded a (-) 1.15% contraction. Nevertheless, underlying inflation continued to log upward surprises. On a biweekly period, the underlying component recorded a 0.31% (vs 0.28%e.) rise and remained close to its 20-year high levels at a 7.24% annual rate. Commodities increased 0.35%, a slowdown with respect to the 0.5% average growth logged in the last 8 biweekly periods, with inflation being higher among food prices (0.51%). Services, for their part, maintained an upwards trend and increased 0.25% biweekly and were led by airfares (9.76% biweekly) and prices at diners, and torta & taco stands (0.58%). Inflation has started to show signs of moderation, even though the persistence in underlying inflation could keep the Central Bank of Mexico alert. Banxico expects general and underlying inflation to reach its peak this quarter and start decreasing towards its 3% target towards 2024.