The Day at a Glance | May 9 2022

The Top

*Inflation in Mexico increased more than expected (7.68% annual; 7.72%e.); underlying inflation exceeded estimates (0.78% m/m).

*In China, exports (3.9% annual) and imports (0%) slowed down during April.

*G-7 nations commit to gradually stop importing Russian crude oil.

*ECB could start to increase interest rates in July to avoid inflationary expectations from becoming unanchored; Olli Rehn, member of the ECB.

*China increased restrictions in Pekin and Shanghai to control COVID-19 outbreaks.

*Hungary delays EU plan to ban Russian crude oil imports.

*Chinese Premier Li Kequiang warned of a “grave and complicated” employment situation due to confinements.

Economic environment

Inflation in Mexico increased. April`s data confirmed that general inflation continues to increase in Mexico after it logged a 7.68% annual hike. Month over month, prices increased 0.54%, slightly below estimates (0.58%e.) after a contraction in underlying inflation was led by a decrease in energy prices (-1.53% monthly), which compensated the rise in agricultural prices (1%). Electric bill subsidies explain a large part of the decrease in energy prices. However, concerning the underlying component, inflation was also higher than expected (0.78% vs 0.75%e.) and commodities logged a 1.03% monthly increase in prices (inflation was especially high among food prices, which increased +1.25% monthly). Services, for their part, logged a 0.48% increase. The data keeps the Central Bank of Mexico concerned as commodity prices continue to accelerate and don`t show any signs of slowing down, boosting underlying inflation to a 7.22% annual rate, its highest level since January of 2001. This suggests that Banxico will have to continue carrying out an aggressive increase in rates in order for mid and long-term inflationary expectations from becoming unanchored and for inflation to start showing a downwards trend.