The Day at a Glance | October 30 2020

The Top

· The Mexican and European economies log record rates of growth after their reopening.

· Slight acceleration in inflation (PCE 1.4% annual) in the US during September; income (0.9%) and consumption (1.4%) grew more than estimated during the period.

· Economic indicators: China`s PMIs will be published this evening (51.3 e. manuf.).

Economic environment

The Mexican economy grew at a record rate during the 3Q20, in line with expectations of a strong rebound after a devastating second quarter. Quarter over quarter, the economy grew at a rate of 12% (vs. 11.9%e.), its greatest level of growth in at least three decades, according to INEGI figures. Industrial activities recorded the largest expansion during the quarter (22%), while services (8.6%) and agricultural activities (7.4%) increased at a slower pace. The good performance seen in the industry responds to a solid improvement in manufacturing and the exporting sector after a record expansion was also seen in the US. With this, the economy`s annual rate of contraction set at (-) 8.6%, with the industrial sector (-8.9%) and services (-8.8%) still in contraction and visible growth only in the primary sector (7.4%). In the first 9 months of the year the economy is 9.8% under what was seen in the same period of 2019, although these numbers are expected to be revised on November 26th.

Europe`s GDP grew 12.7% during the 3Q20 compared to the previous quarter, which recorded a historical contraction. The figures exceeded estimates (9.6%e.), but the optimism regarding the recovery has weakened in recent weeks after the virus`s outbreaks have considerably affected activities at the start of the 4Q20. France (18.2%), Italy (16.1%) and Spain (16.7%) logged double digit growth while the German economy expanded 8.2%. For the entire block, the contraction at an annual rate reduced to (-) 4.1% (vs. -5.2% e.). The positive surprise was overshadowed by a growing number of COVID-19 cases in the region and inflationary data that confirmed three consecutive months of negative rates. General inflation set at (-) 0.3% annual during October and underlying inflation maintained just above zero (0.2% annual), which confirmed the virus`s negative and prolonged impact on prices. The ECB expects to continue seeing negative rates of inflation up until the start of 2021, even though it denied that the economy is seeing deflation.