The Day at a Glance | October 12 2021

The Top

*The United States House of Representatives will vote on approving a temporary proposal to increase the debt ceiling.

*Industrial activities increased 0.4% (5.2% annual) during August; construction (1.9% m/m) led the increase.

*Investor confidence in the German economy fell for a fifth consecutive month (ZEW 22.3 vs 23.5e.) to its lowest level since the pandemic.

*An initial rise in salaries is not necessarily a sign of sustained inflation: Philip Lane, ECB Chief Economist.

*Electricity reform will destroy Canadian businesses` investments in Mexico: CanCham.

*White House warns citizens that a scarcity of goods and increased prices could occur this Christmas.

*Economic indicators: China`s trade balance figures are expected to be made public tonight.

Economic environment

The House of Representatives will vote on the debt ceiling today. The U.S. House of Representatives is expected to vote on a measure proposed by the Senate to increase the debt ceiling in 480 billion dollars today, which would allow the Treasury to maintain its course until December 3rd. The debt ceiling would set at 28.9 trillion dollars and would give enough room for negotiations to reach a bipartisan agreement by the end of the year. However, the risk of non-payment of financial obligations would remain in place if Republicans and Democrats don`t reach an agreement before the last month of 2021. Mitch McConnell, Republican leader of the Senate, assured that they will not back any further extensions beyond December, which is why Democrats would have to unilaterally increase the debt ceiling through a “budgetary reconciliation” process in case they want to widen the debt ceiling once more. The discussion regarding the debt ceiling is highly influenced by partisan interests in light of intermediate elections in November of 2022, in which Republicans seek to once again hold majority in one of the chambers.

Industrial production increased in Mexico. Figures made public by the INEGI confirmed a 0.4% rate of growth in industrial production during August, a surprisingly good piece of news with respect to the estimated (-) 0.6%. Growth was led by the construction sector, which increased 1.9% during the month and was the only sector to log acceleration with respect to July. Manufacturing activities were another sector that recorded expansion during the month, even though marginally (0.2%); while utilities (-2.5%) and mining (-0.1%) logged a slowdown. At an annual rate, industrial production continued to recover (5.2%) and did so at a faster than expected pace (4%e.). A large part of this can be explained by positive performance seen in the construction sector (7.6% annual), which overtook manufacturing activities (6.1%) as the sector that has recovered at its fastest rate in the last 12 months, followed by mining (1.7%).