The Day at a Glance | September 6 2021

The Top

*Inflation today is not the same as in the seventies: Catherine Mann, Bank of England.

*Fixed investment recedes in Mexico during July (-1.8% monthly; 16.9% annual); private consumption falls (-) 0.8% (19.1% annual).

*Car production (-21.4% annual) and exports (-19.6%) in Mexico fell considerably in August.

*Federal unemployment aid in the United States comes to an end.

*Delta variant`s spread slows down for a second consecutive week; the number of deaths also decreased.

Economic environment

Inflation today is not comparable to the 1970`s. In a speech at the National University of Australia, the recently elected member of the Central Bank of England, Catherine Mann, assured that inflation today is very different than that seen during the seventies, when “stagflation” (high inflation and low levels of growth) caused a crisis. According to Mann, history is an important guide to try to anticipate future events, but the differences between that time in history compared to what is seen now a days are important, and suggest that the FED is well positioned to respond to the evolution of prices. Currently, the larger part of wages in the economy are not necessarily indexed to inflation, according to Mann (other than there being flexible hiring schemes that reduce labor cost pressures for businesses); there is no uncontrolled volatility in oil prices and expectations of inflation are anchored; the relationship between unemployment and increasing wages (Phillips Curve) has decreased in the last 15 years; and businesses don’t have enough power to fix high prices, something that has been evident since the 2008 crisis. In this sense, there is a lower risk of seeing persistent, high inflation that could force the FED to carry out immediate actions in order to normalize its monetary policy. For Mann, the FED has the necessary tools to face any inflationary concern.