The Day at a Glance | November 24 2022

The Top

*Inflation in Mexico continues slowing down.

*COVID-19 cases reached a new record in China.

*70% of Kyiv was left without electrical power after Russian attacks on Ukrainian infrastructure.

*EU is preparing a ninth package of sanctions against Russia; the package will include steel and technology trade restrictions.

Economic environment

Inflation slowing down. The National Consumer Price Index once again logged a slowdown in the first half of November, according to figures made public by the INEGI. General inflation increased 0.56% biweekly, way below the 0.65% figure expected by analysts and set at an 8.14% annual rate. This is the lowest rate of inflation since mid-2022 and was caused by a drop in the non-underlying annual component because of a low base comparison in 2021. Agricultural prices logged a biweekly setback (-0.37%); meanwhile, energy prices increased 3.51% biweekly and were led by electricity prices (20.29%), which are still normalizing in 8 cities after seasonal electric bill subsidies came to an end. In the underlying component, effects of a high base comparison still have no impact and they aren’t expected to do so until 2023 when annual rates of inflation will be reflected. On a biweekly period, underlying inflation slightly exceeded estimates (0.34% vs 0.3%e.) and continued increasing at an annual pace (8.66%), however, its components are logging moderation in their biweekly rates. The hike recorded in prices of goods became substantially more moderate with respect to their previous biweekly increases; limited increases were recorded among food (0.35% biweekly) and non-food products (0.35%). Services increased 0.34% and were mainly boosted by other services (0.62%), especially food services (0.53%), air-travel (12.93%), and professional (10.41%) and tourist services (5.18%). Other than this, inflation in services was very low, with marginal increases being logged in housing (0.08%) and no changes being recorded in education (0%). The data was positive and confirmed the start of a decrease in inflation – in line with the Central Bank of Mexico´s expectations. Banxico expects to see a faster slowdown in inflation in 2023, and forecasts it will set at 4.1% at the end of said year. At the moment, a less aggressive FED and more positive inflationary data will allow interest rate increases to ease; and if underlying inflation starts to decrease in 2023, it could point towards the end of the increasing rates cycle in the following months.