The Day at a Glance | May 7 2020

Mexico records lowest inflation since December 2015

INEGI figures published this morning show a monthly (-) 1.01% general contraction regarding consumer prices in April, which has taken the annual rate to 2.15%, very close to its historically low level – reached in December 2015 (2.13%). The largest drop was seen, once again, in energy prices (-12.45% monthly) – due to their recent collapse – even though fruits and vegetables also recorded a considerable decrease (-4.12%). With this, non-underlying inflation reached its lowest level in its recently recorded history (-1.96%). Regarding the underlying component of inflation, there was a monthly 0.36% increase which set the less volatile indicator of prices at 3.5% annual and confirmed a stronger downwards trend. What stands out concerning underlying prices is an acceleration in the prices of goods (0.63% monthly), which was largely compensated by a deceleration, and almost stagnation regarding the prices of services (0.06%). The monthly contraction recorded in April is the largest since inflation has been recorded, and it guarantees lower interest rates in Mexico in the short run.

China and the US will have trade conversations

American and Chinese negotiators, Robert Lighthizer and Liu He, will have a telephone conversation next week; their first meeting since January, when the “phase one” trade agreement was signed. The meeting will be held a few days after President Donald Trump threatened to withdraw from the trade agreement if China did not meet its purchase commitments, which rekindled concerns of commercial frictions between both countries. It`s expected they will discuss topics regarding the implementation of the agreement. The agreement stipulates and agreement between both parties 6 months after its signing, but conversations have been brought forward slightly, possibly because of Donald Trump. China has fallen behind regarding the achievement of the agreement`s goals, after imports coming from the US contracted (-) 5.9% during the first four months of the year due to the negative impacts of COVID-19. China will seek to reaffirm its intentions of reaching its goals, despite setbacks, in an environment that has seen tensions between both countries increase after the US administration has strongly criticized Beijing for mishandling the health emergency at the beginning of 2020.

Another 3 million Americans file for unemployment benefits

Initial jobless claims increased in 3.16 million during the first week of May, totaling 33.5 million in the last month and a half. Of these claims, at least 22.6 million were still in process during the first week of April, which sets the estimated rate of unemployment (a figure that will be made public next week) at least at 16%. Initial jobless claims have been slowing down in recent weeks, even though they are still at historically high levels.