The Day at a Glance | November 9 2023

*Consumer inflation in Mexico moderated its pace of growth in October and was supported by the non-core component.

*In China, consumer inflation receded more than expected in October by logging a -0.2% y/y figure; while producer inflation remained in negative territory for the thirteenth consecutive month with a reading of -2.6% y/y.

*In the US, unemployment claims fell to 220,000 in the week ending November 4th, but still set near the seven-week high logged in late October. Similarly, recurring requests increased by 22 thousand to 1.834 million at the end of October.

*Israel claims to have destroyed 130 Hamas tunnels so far during its ground operations in Gaza, undermining the terrorist group’s infrastructure. However, the Israeli army´s actions have led to the death of 10,500 people and more than 26,000 injuries since the conflict began, according to a report from the Palestinian Ministry of Health.

*The third Republican primary debate took place in Miami on Wednesday night, which Donald Trump once again did not attend. A key focus of the event was foreign policy, as all candidates promised to support Israel, as well as unite to oppose Hamas, Iran and China.

*Banxico will announce its monetary policy decision this afternoon, for which we expect the reference rate to remain unchanged.

Economic environment

Consumer inflation in Mexico continued to moderate for a ninth consecutive month and set at 4.26% y/y in October. This is the lowest annual reading since February 2021. Likewise, the general index continued decreasing and logged a 0.38% monthly change – 0.16pp lower than the historical average (2000-2022) for said month. The moderation was supported exclusively by the non-underlying sub-index, which recorded a monthly 0.34% figure, significantly lower than both the previous figure of 0.7% m/m and the historical average of 1.34% m/m and which in turn, it responded to the -2.09% m/m drop in agriculture, limiting the 3.72% m/m increase in the energy sector. Underlying prices, which logged a 0.39% m/m figure, remained slightly pressured by an acceleration in the food, beverages and tobacco category (0.45% m/m vs. 0.27% m/m prev.) ; other services (0.64% m/m vs. 0.04% m/m prev.), and housing (0.3% m/m vs. 0.23% m/m prev.). However, the virtually null progress logged in educational services (0.01% m/m) and the moderation in non-food merchandise prices (0.21% m/m) allowed the underlying component´s annual reading to decrease for a ninth consecutive period and set at 5.5%; while non-core inflation kept slowing down and logged a 0.56% y/y figure. Thus, non-underlying prices are the escape valve once again – but we believe energy prices to be the greatest risk for year-end readings due to the increase seen in energy.