The Day at a Glance | September 23 2021

The Top

*Inflation in Mexico exceeded estimates during the first half of September and accelerated once again.

*Economic activity in Europe slowed down considerably during September.

*China tells Evergrande to avoid near-term dollar bond default.

*Bank of England is leaning towards moving up a rise in interest rates as it forecasts inflation will exceed 4% at the end of the year.

*United States authorizes Pfizer`s third dose for people over 65 years old.

*FED confirms that it will start the withdrawal of its purchasing program soon; members are divided on whether the rise in rates will start in 2022 or 2023.

*Economic indicators: PMI`s are expected to be made public in the United States (Manuf. 61e.; Serv. 54.9e.).

Economic environment

New surprising raise in inflation. According to the INEGI`s figures made public this morning, inflation for consumers increased 0.42% during the first half of September, figure considerably higher than the average estimated by analysts (0.28%e.). With this, annual inflation set at 5.87%, its highest level since July. Underlying inflation also surprised to the upside by increasing 0.31% biweekly (vs 0.24%e.), which maintained its upwards trend at an annual rate (4.92%). Commodity prices (0.43% biweekly) are still the ones that are growing the most, while prices for services increased 0.17%, boosted by education (tuition fees, 1.15%). Agricultural goods were another component that greatly contributed to the widespread increase in prices, especially due to the 2.39% biweekly increase of fruits and vegetables. Energy prices, for their part, recorded a 0.81% increase, led by LP gas prices (2.26%) and low octane gasolines (0.38%). The surprising rise only reinforces the expectation that the Central Bank of Mexico will increase rates at least two more times this year; and it`s possible that today`s surprise could move the bank`s actions forward to September 30th, when it`s scheduled to have a monetary policy meeting.

PMI`s surprised to the downside in Europe. The most recent reading of leading economic activity indicators for the European economy showed a greater than expected slowdown during September. The Composite PMI, which measures the larger part of the economy`s activity, slowed down to 56.1, its lowest level in 5 months and way below the level that was expected by analysts (58.5e.). Both manufacturing (58.7 vs 61.4 prev.) and services (56.3 vs 59 prev.) slowed down strongly as surveys revealed that growth has been undermined by delays in deliveries in supply chains, input shortages and increased prices. Input costs increased to their highest level in 21 years. These limitations have prevented companies in both sectors from meeting demand, which remains strong. Confidence regarding the economy`s future dropped to its slowest level since January.