The Day at a Glance | May 25 2021

The Top

*Members of the FED reaffirm that inflationary pressures will be temporary in public speeches.

*Trade balance in Mexico once again records a surplus in April after a record recovery in exports.

*G-7 is close to reaching an agreement to implement a minimum corporate tax of 15% at a global level.

*Economic indicators: Confidence in the German economy improves (Ifo 102.9 vs 101 e. May).

Economic environment

Members of the Federal Reserve once again dismissed inflationary pressures in the United States. Lael Brainard, Raphael Bostic and James Bullard said that they wouldn’t be surprised if prices in the economy increase in the following months due to a suppressed demand during the pandemic that is recovering strongly after the reopening; while problems in supply chains impede supply from quickly reaching an equilibrium with demand. However, they considered that these effects will be temporary and don’t pose a risk to the economy`s recovery. Brainard assured that, despite recent inflationary pressures, long term expectations remain anchored and if these were to rise, the FED counts on enough available tools to keep inflation at its 2% average target. Bullard expects to see inflation remain above 2% until at least the start of 2022, while Bostic backs that same stance, only both consider that the rising pressures in prices will not be persistent. The statements made reiterate an accommodative stance on behalf of the central bank – who`s expected to maintain the quantitative easing program at its current rhythm until at least the first half of 2022; and interest rates close to zero until the end of the same year.

The trade balance in Mexico recorded a 1,501 million dollar surplus during April. Timely figures from the INEGI regarding the Merchandise Trade Balance showed a strong recovery in exports one year after the most severe impact caused by the pandemic. Month over month exports increased 0.24% in April with a 0.28% increase in non-oil exports and a (-) 0.42% drop in oil exports. Despite the moderate monthly rate of growth, exports recorded a 75.6% increase at an annual rate (73.1% non-oil, 139% oil), a record figure that reflects the solid recovery after the pandemic`s impact in April last year. The economic recovery in the US explains this increase in a large extent. As for imports, these fell 8.11% m/m in April and logged a 48.4% annual rate of growth. The recovery seen in imports has been slower than that in exports due to the absence of stimuli in the domestic market during the pandemic. Among April`s data, the import of consumer goods fell (-) 2.99% during the month, intermediate goods dropped (-) 9.19% and capital goods decreased (-) 4.4%. After the extraordinary growth seen in imports in March, it`s normal to see them stabilize during April, however, the figures reflect a less dynamic performance in domestic demand with respect to foreign demand.