The Day at a Glance | Sep 7 2022

The Top

*Chinese exports increased less than expected during August (7.1% annual): Exports to the US receded for the first time since 2020.

*Europe`s 2Q22 GDP growth was revised upwards to 0.8% (4.1% annual); consumption and government spending boosted growth.

*Exports (18.3% m/m) and production (21.8%) of vehicles in Mexico increased during August.

*The EU will propose a price ceiling on Russian natural gas; the Chech Republic criticized the measure as it doesn’t solve the energy crisis.

*Fiscal stimulus for gasolines have cost a little more than 290,000 million pesos up to August; 400 thousand is expected for the entire year: SAT.

*Chinese international reserves decreased for a second consecutive month to their lowest level since 2018.

*Chilean Central Bank surprised markets by increasing the interest rate in 100bp in order to control inflation.

Economic environment

Weakness in China. Growth in Chinese exports slowed down more than expected during August and imports became stagnant, reinforcing a dark growth outlook in China and the world. Exports increased 7.1% annual during the month, the slowest increase since April, when quarantine measures were carried out in Shanghai. Imports, for their part, barely increased an annual 0.3%. Weakness in imports and in the domestic market is bad news not only for China`s recovery, but for growth in the rest of the world as well: For countries that produce raw materials (such as Australia and Brazil), and for manufacturing countries (like Europe and Asia), who direct said production towards China`s economy. Exports were affected by recent COVID-19 outbreaks, extreme climate conditions and power cuts that have decreased production capacity in the country. Exports to the United States stood out as they receded (-) 3.8% on an annual basis during August, while exports to Europe slowed down strongly to 11.1% annual (after having increased more than 20% in previous months). Exports to Russia continued increasing rapidly (26.7% annual) as Chinese companies take over the gap that Western companies left in Russia`s market. Since the pandemic, exports have been China`s main driver for growth, but their slowdown is a risk factor for the world`s second largest economy. Now, growth will depend more on the domestic market, which remains very weak and still requires stimulus.