The Day at a Glance | November 23 2023

*Inflation in Mexico accelerated during the first half of November. 

*PMI´s in the Eurozone forecast more moderate deterioration in economic activity during November. 

*Israeli forces are carrying out the forced evacuation of hundreds of patients in hospitals in Gaza.

Economic environment

Inflation in Mexico accelerated during the first half of November. After two consecutive biweekly declines, general inflation rebounded to 4.32% y/y in the first half of the month. This higher figure was caused by an acceleration in the biweekly data (to 0.63%), and marked the highest reading since the same period of 2021. It’s worth pointing out that while this figure seems high, it´s lower than the 0.65% q/q historical average  for the same period (2000-2022). Furthermore, the composition of this data is counterintuitive, as the acceleration is attributed to non-core inflation, which logged a biweekly 1.96% figure, driven by higher energy prices (2.77% q/q) and set below their historical average (2000-2022). However, agricultural prices did log a change of more than double the historical average, with a 1.03% q/q figure. On the other hand, the core index recorded a slight increase (to 0.2% q/q) and set at a higher level than the historical average of 0.16% q/q, with services remaining particularly high at 0.28% q/q. With this, annual data for core and non-core components set at 5.31% and 1.41% y/y, respectively.

The Eurozone´s PMI´s slightly surprised to the upside, forecasting relative improvement in November. After hitting its lowest reading in almost three years at 46.5 points, the latest composite PMI figure stood at 47.1 points, slightly exceeding the market forecast of 46.9. However, the leading indicator remained in contractionary territory for a sixth consecutive month. Breaking the figure down, the manufacturing PMI rebounded to a six-month high at 43.8 points, above the estimated 43.8 figure, although it remained below the 50-point threshold for an eighth consecutive month. This ongoing negative performance can be attributed to job cuts, as well as a decrease in purchasing and inventory levels. On the positive side, or at least within this context, input costs and selling prices decreased due to lower demand, while confidence in future conditions improved slightly. Meanwhile, the services sector index increased to 48.2 points from the previous month’s 47.8 level, marking its fourth month in contractionary territory but surpassing the 48.1 forecast. This relative improvement resulted from a more moderate decline in new orders, and service providers continued to increase their staff. In contrast with the manufacturing sector, input costs and selling prices were higher in November, along with a slight deterioration in the sector´s outlook. In conclusion, the overall decline in activity is once again primarily attributed to a drop in new orders – as observed since June – which has led to stagnation in the Eurozone´s economy. This increases the likelihood of a second consecutive quarter of a setback in GDP, which would entail a technical recession. Lastly, despite an overall drop in employment due to cuts in the manufacturing sector, this was marginal due to a payroll increase in the services sector, accompanied by higher wages, resulting in a general increase in prices in November. Thus, halfway through the quarter, the Eurozone´s outlook has become even more uncertain, with a contraction in activity along with higher price levels.