The Day at a Glance | November 26 2020

The Top

· Growth in Mexico was slightly revised upwards (3Q20 12.1% vs 12% prev.).

· News regarding vaccines triggered capital flows towards emerging markets: IIF.

Economic environment

Figures revised by the INEGI regarding Mexico`s GDP confirmed historical economic expansion in the 3Q20. Growth set at 12.1% quarter over quarter after a strong contraction was seen in the 2Q due to the pandemic. At an annual rate, the economy was still 8.6% under what was seen in the same quarter of last year as the value of accumulated production between January-September 2020 is 9.8% less than what was seen in the same period of 2019. The industrial sector was the most productive as it gained the largest recovery (21.7%), followed by the services sector (8.8%). Primary activities also showed growth during the quarter (8%) and were the only ones to show expansion with respect to 2019 (7.4% annual; 1.2% YTD). According to the Global Indicator of Economic Activity (IGAE, for its initials in Spanish), the Mexican economy`s recovery had maintained its rhythm towards September, even though at a more moderate rate as time moved forward (1% monthly, Sept.). Something that stands out is the fact that the industrial sector recorded a halt in recovery during the last month of the quarter (1.8% Sept vs 0.9% Aug.) while the services sector logged acceleration in its recovery (1.8% Sept. vs 0.9% Aug.). Foreign demand, particularly coming from the US, has greatly backed the industrial sector`s recovery during the 3Q20; while the recovery in services has been more moderate as economic activities normalize and temporarily lost jobs due to the pandemic are recovered. For the 4Q20 a much more limited rate of growth is expected (0.9% quarterly e.) once the initial boost has thinned.

During November, emerging markets recorded positive capital flows at a rate not seen in years, according to a report published by the Institute of International Finance (IIF). The IIF assured that emerging markets have overcome the strong capital outflows phase seen because of the pandemic and saw influx that could continue towards the end of the year. Investment portfolios of foreign residents in emerging economies (excluding China) are growing at their highest rate since the second quarter of 2014, boosted by a positive perspective regarding global recovery, greater foreign demand and growing commodity prices towards 2021 after the confirmation of COVID-19 vaccine developments. This has led investors to seek assets in emerging markets, which has strengthened these countries` currencies.