The Day at a Glance | October 27 2023

*September´s annual expenditure deflator in the US set in line with market estimates, while consumer spending accelerated more than expected. 

*In Mexico, the trade balance logged a -$1.481 billion dollar deficit in September, exceeding both analysts’ forecast (-$437 million) and the -$909 million deficit recorded a year ago. 

*The Israeli Defense Forces (IDF) are preparing for the next stage of the war against Hamas, which is expected to be a ground incursion following the current bombing in the Gaza Strip. Meanwhile, 200 hostages are still being held by Hamas.

*The US conducted airstrikes on two facilities linked to Iran-backed militias in Syria this Thursday in response to the attack on American forces in the region. It was reported that President Biden’s ordered attack is not related to the conflict in Gaza. 

*Democratic Representative from Minnesota, Dean Phillips, announced yesterday that he will launch his candidacy for the Democratic primaries, challenging President Joe Biden, arguing that the current incumbent would be a weak candidate in the presidential elections due to his age and low approval ratings.

Economic environment

The consumer spending deflator maintained its pace of growth for the third consecutive month; however, consumer spending shows greater strength than expected. This morning, September´s consumer spending figures in the United States, along with its corresponding deflator, were published. The Federal Reserve’s preferred inflationary indicator stood at 3.4% on an annual basis, matching the reading logged in the previous two months (August revised down by 0.1 percentage points); although it remains elevated, it set in line with market expectations. This reading resulted from a monthly 0.4% figure (compared to an expected 0.3%). Meanwhile, core inflation continued its downward trend and set at 3.7% on a monthly basis, its lowest reading since May 2021, matching analysts’ forecasts, following a 0.3% monthly figure. However, the spotlight focused on consumer spending, which exceeded market expectations (0.5% m/m expected) by accelerating to 0.7% on a monthly basis, up from the previous reading of 0.4%. Specifically, spending on services increased significantly by 0.8% on a monthly basis, while spending on goods advanced by 0.7%. With this, real consumer spending increased by 0.4% on a monthly basis, reaffirming the strong momentum of US consumption, which represents 2/3 of US economic activity. However, given high credit card balances – which help finance consumption – and high interest rates, a slowdown is still expected to occur in this category in the coming months.