The Day at a Glance | October 7 2022

*Employment in the United States met estimates (263k), unemployment dropped to 3.5%.

*Inflation in Mexico surprised to the downside during September (8.7% annual).

*Economy Minister Tatiana Clouthier resigned, AMLO announced Raquel Buenrostro (ex-SAT) as replacement.

*There is no evidence that backs a moderation in the interest rate increase: Loretta Mester, Cleveland FED.

*Biden warns that Putin`s nuclear threats could be real; the risk of escalation is real.

Economic environment

Employment in the United States set in line with estimates. Employment data in the United States practically set in line with estimates and pointed towards a gradual moderation in the labor market`s strength. 263,000 jobs were created during September (vs 250,000e.), a considerable slowdown with respect to the 315 thousand figure recorded in August and the 528 thousand level logged in July. The unemployment rate dropped, however it decreased to 3.5% due to a lower participation rate (62.3%). The greater part of jobs were created in the leisure and lodging sector (83 thousand) and medical services (60 thousand). Wages increased in line with monthly forecasts (0.3%) and became slightly more moderate at an annual rate (5%). The figure doesn’t bring up any concerning wage pressures. All in all, the data confirms that the Federal Reserve is seeing what expects in the labor market in order for it to meet its inflationary pressures regarding demand and wages. Figures have not modified interest rate expectations in the United States and additional inflationary data made public next week will help calibrate the FED`s future actions. 

Inflation in Mexico surprised to the downside. Inflation in Mexico finally started showing signs of stabilization during September after the fact that the Consumer Price Index logged a lower than expected increase during the month (0.62% vs 0.67%e.) and remained at an annual 8.7% (vs 8.75%e.). Underlying inflation also increased less than expected and logged a 0.67% monthly increase (vs 0.74%) and reached a 8.28% annual rate (vs 8.34%e.). The contraction in prices in energy stood out (-0.72%) as it was led by low octane fuel (-0.56%) and a slower than expected rise in inflation among commodities and services. Volatile prices in agriculture logged a considerable monthly increase (1.51%) but were not enough to boost a larger expected rise. Commodity prices became more moderate with respect to August`s figure (0.94%) and services practically remained constant (0.35%) in light of higher education fees (2.08% monthly), which were offset by a moderation in other services (0.1%). One of the most determining factors in the stabilization in overall inflation is the base comparison as the effects could start contributing towards a gradual moderation in prices towards 2023; although the moderate increase in underlying inflation is also good news. Inflation is starting to show signs that it`s reaching its peak, which could contribute to a less aggressive increasing rates cycle on behalf of the Central Bank of Mexico towards 2023. However, inflationary risks have not disappeared and the outlook still seems complicated for the central bank.