The Day at a Glance | October 14 2022

*Inflation in China remains low (2.8% annual, Sept.); PBoC is committed to continue backing the economy.

*Markets take into account 75bp increases on behalf of the FED in November and December after the inflationary surprise.

High inflation and slow growth pose a risk to financial stability: Christine Lagarde, President of the ECB.

Retail sales in the US increased less than expected in September (0% vs 0.2%e. m/m).

Raquel Buenrostro, the new Secretary of the Economy, took out Luz Maria de la Mora from carrying out energy negotiations with the US; it`s feared that Mexico will take a more aggressive stance. 

Inflation in Spain (9% annual) and France (6.2%) became more moderate during September.

Kwasi Kwarteng was fired from his position as United Kingdom Minister of Finance in an effort from Truss`s government to return confidence to markets.

Economic environment

Low inflation in China. Consumer prices in China`s economy maintained slow growth during September by growing at a 2.8% annual rate (2.9%e.). The rise was mainly boosted by pork prices – there is no concerning increase in the rest of the components. In fact, underlying inflation became more moderate in its monthly rate of expansion, which logged a 0.6% figure in September (vs 0.8% Aug.), its lowest level since March of 2021. This confirms that consumption remains weak, probably because of low consumer confidence and changes in spending habits due to quarantines; household savings in China reached a new record. With economic growth decreasing, China could be entering a period of deflation, something entirely different compared to what the rest of the world is going through. Signs of slower inflation were reinforced by inflation for producers which decreased to 0.9% annual, its lowest level since mid 2020 given low levels of raw material prices and manufacturing inputs. The People`s Bank of China has considered that inflation is stable and will call on banks to continue supplying credit to various strategic sectors in the economy (infrastructure, manufacturing, properties), with the intention of boosting a recovery. Chinese assets could return to attractive levels for investors at a global level if China picks up its recovery trend in the following quarters. Next week will bring the Congress of the Communist Party in China, a meeting that takes place every 5 years and establishes government plans and economic policy principles for the next five years. The event will be key to understand whether or not the Party is in favor of Xi Jinping`s continued leadership.