The Day at a Glance | November 30 2023

*In line with forecasts, PCE inflation in the US slowed down to 3% in October. 
*The Eurozone´s preliminary consumer inflation reading for November surprised to the downside. 
*China’s composite PMI forecasts that economic activity may have grown at its slowest pace this year during November.
*In Mexico, the unemployment rate remained down for the third consecutive month in October, standing at 2.7% of the Economically Active Population, lower than the 2.8% expected by the market, and marked the third-best historical record.
*The Federal Reserve’s “Beige Book” indicated that economic activity in the US slowed down since the previous report. Additionally, the document reported that the economic outlook for the next six to twelve months decreased during the reporting period.
*New unemployment claims in the US increased by 7 thousand requests to 218 thousand in the week ending on November 25th. Meanwhile, recurring claims increased by 86 thousand, reaching 1.927 million applications for the week ending November 18th, marking their highest level since November 2021.
Economic environment
The FED’s preferred indicator for monitoring inflation recorded moderation, in line with expectations. In October, inflation in the US, as estimated by the Personal Consumption Expenditures (PCE) Price Index, recorded its lowest reading since March 2021, at 3.0% y/y. This was achieved after a negligible monthly change (0.0%), which, in turn, was the lowest reading with this frequency since July 2022. Similarly, the core component, which reflects inflation´s long-term trend, also slowed its pace to 0.2% m/m (vs. 0.3% m/m prev.) and 3.5% y/y (vs. 3.7% y/y prev.). With this, PCE figures confirm the trend shown by the Consumer Price Index two weeks ago.
Consumer inflation in the Eurozone surprised to the downside. November´s figure recorded a 2.4% annual change, a level that not only set below than the market’s expected 2.7% y/y, but is also the lowest figure since July 2021. This positive surprise was mainly driven by a -11.5% y/y setback in energy prices, along with a moderation in food, alcohol, and tobacco prices (to 6.9% y/y vs. 7.4% prev.). Similarly, the underlying component – which excludes food and energy prices – replicated this behavior with a 3.6% y/y reading, the lowest observed since April 2022 and below the consensus´ expected 3.9% y/y, with the services sector tempering its annual growth rate to 4.0% y/y (vs. 4.6% y/y prev.). Despite the positive tone of this morning’s figures, which is likely to lead market participants to start incorporating cuts in the European Central Bank´s key rates as early as the 1Q24, the ECB´s president warned this week that “it was not the time to start declaring victory” regarding achieving the 2% inflationary target, as wage pressures continue to be strong, and are a “key factor for domestic inflation.”
China’s PMI´s expect slower momentum in November. For the second consecutive month, China’s composite PMI logged a decline, reaching 50.4 points in November, its lowest reading so far this year. While this less favorable performance is attributed to the two sectors that make up the indicator, the non-manufacturing PMI showed the greatest decline, now standing at 50.2 points; not only falling by 0.4 points but is also its slowest pace of growth in 2023, during which it has strung together eleven consecutive readings above the 50-point threshold. This less favorable performance resulted from a weakening in demand, with a deterioration in the new orders category and still contractive readings in foreign sales in both sectors. Also, input costs and selling prices indicate weak inflationary readings for November. Thus, the latest data from leading indicators denote the complications that China continues to face after the relaxation of the anti-COVID measures almost a year ago, which include both deflationary risks and weak global demand. Due to this, the measures taken by the Chinese politburo since June seem to be insufficient. However, an interesting point is that sentiment in both sectors increased in November to their highest readings – since February for manufacturing (55.8) and since June for non-manufacturing (59.9).

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