The Day at a Glance | May 26 2022

The Top

*Li Keqiang, Premier of the People´s Republic of China, said he is concerned about the lack of stimulus in the country´s economy; he warned of a contraction in the 2Q22.

*Retail sales in Mexico increased 0.4% during March (3.8% annual).

*A deeper contraction in US GDP was confirmed in the 1Q22 (-1.5% annualized vs -1.3% prev.).

*The risk of a sovereign debt crisis among emerging economies is not imminent: Gita Gopinath, Deputy Managing Director of the IMF.

*The Kremlin accused the West for the grain scarcity crisis; it said that the sanctions imposed on Russia, which prevent the transportation of goods, are illegal.

*PEMEX crude oil exports decreased 0.5% during April.

*FED meeting minutes confirmed two 50bp increases in June and July; after that, increases will depend on how inflation evolves.

*The FED´s interest rate increases will not necessarily weaken the Yen: Haruhiko Kuroda, President of the BoJ.

Economic environment

Slow growth in China.  Premier of the People´s Republic of China, Li Keqiang, has warned that the likelihood of reaching the country´s 5.5% growth target in 2022 is shrinking more and more as strict COVID-19 policies are severely affecting growth and employment. Li called on local governments, state companies and financial institutions to implement actions announced by the government in order to stabilize growth in the country and avoid an economic contraction in the 2Q22. Li pointed out that the collapse in industrial production and consumption along with the rise in unemployment are concerning; he even affirmed that China´s economy is, in some aspects, worse than in 2020 after the initial COVID-19 outbreak that caused a crisis at a global level. The Premier considers that if the economy is not backed, China will pay the price of a very slow recovery; which is why it must continue expanding at all cost. The unemployment problem is one of the most concerning issues, he said, especially if this extends for a longer period of time. Regarding inflation, he called to avoid decreases in food inventories and maintain electricity production (through the use of coal, given the scarcity of energy resources), in efforts to keep inflation contained. Li´s warnings have increased expectations that Peking will soon recognize that it will not reach its growth target this year. Analysts´ growth estimates have been revised downwards substantially (4.5% for 2022). There is even speculation within the Communist Party regarding President Xi Jinping´s “zero COVID” policy, which has led to deep economic repercussions. According to Bloomberg leading indicators, economic activity in China remained in contraction during May and didn´t show any signs of improvement – with slow domestic and foreign demand.