The Day at a Glance | September 22 2020

The Top

· The economic recovery will be slow and uncertain: Powell.

· The savings rate among European households grows to its highest level in history (17% of disposable income) during the pandemic: ECB.

· Private investment in Mexico records its greatest setback in 25 years (-33.2%) in the 1S20.

· James Bullard, President of the St. Louis FED, considers that no more fiscal stimulus is necessary in the US.

· Economic indicators: Consumer confidence in Europe is expected to show no improvement in September (-14.6 e. vs 14.7 prev.), as well as Japanese PMIs.

Economic environment

Through published comments made before his appearance before the House of Representatives, Jerome Powell assured that the economic recovery will be slow and uncertain. The Chair of the FED recognized that the economy is improving, but that it still has a long way to go to completely recover from the pandemic. “Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain, “ wrote Powell in a script that will be read this morning before the House Financial Services Committee. According to Powell, the recovery will depend on the virus`s evolution and the government`s fiscal actions. Powell will also speak about the $600 billion dollar credit to small and medium sized businesses program, which he suggested making modifications to in order to avoid paying the total amount of debt acquired – with the intention of truly helping businesses. Powell will testify with Steven Mnuchin, Secretary of the Treasury, as part of a quarterly monitoring scheme of the CARES Act approved in March – of $2 trillion dollars.

Aggregate supply and demand figures published by the INEGI yesterday confirmed strong contractions in consumption, investment and exports during the first half of 2020 in Mexico. The data confirmed a (-) 10.1% contraction in GDP during the first half of the year and a (-) 16.7% contraction in imports, measuring global supply of goods and services. Regarding demand, contractions were recorded in private consumption (-10.6%), investment – both public and private (-21.4%) and exports (-15.3%). The only component that recorded growth was government consumption, which increased 2.9% with respect to the same period of 2019. Recent data shows improvement as the economy returns to normalcy, even though the recovery has started to show slower momentum since August.