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The Banxico September survey showed a modest improvement in expectations. Median forecasts for headline and core inflation at year-end 2026 fell to 3.87% and 3.90%, from 3.90% and 3.99%, while the GDP growth forecast rose from 1.30% to 1.40%. For 2027, inflation is expected at 3.82% and 3.78%, respectively, with growth at 1.80%. The expected overnight rate remained at 6.50% for both year-end periods, while the exchange rate forecasts stood at 17.50 and 18.04 pesos per dollar, respectively.

Our Take

The lower core inflation forecast and upward growth revision are encouraging, although the outlook remains one of modest expansion and inflation above the 3% target, even in 2027. The unchanged expected policy rate signals caution regarding further monetary adjustments. On the FX front, consensus forecasts point to a gradual depreciation through 2027, which could intensify if dollar strength and external pressures persist.

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In September, Mexico’s IMEF Manufacturing Indicator rose 0.1 point to 50.0, reaching the neutral threshold after an extended period in contraction. Employment improved to 50.2, although production fell to 47.7 and new orders lost some momentum. Meanwhile, the Non-Manufacturing Indicator rose 0.2 point to 49.2, remaining in contractionary territory, with weakness in orders, activity and employment.

Our Take

The economy is showing signs of stabilization, although it still lacks enough momentum to return to sustained expansion. In manufacturing, reaching the 50-point threshold is encouraging, but weaker production and slowing orders limit the upside. Weakness in trade and services, particularly employment, also points to subdued domestic demand momentum.

In September, 129,288 light vehicles were sold in Mexico, an 8.0% year-over-year increase, according to INEGI. Growth accelerated from 3.4% in July and 2.2% in August. From January through September, sales totaled 1,144,002 units, 5.0% above the same period last year and the highest year-to-date figure since 2016.

Our Take

Auto sales point to strength in durable-goods consumption and ended the quarter with growth above the year-to-date pace. This is a positive signal for domestic demand, although it should be assessed alongside other indicators before concluding that a broad-based consumption recovery is underway.

Eurozone inflation accelerated from 3.2% to 3.8% year over year in September, above the 3.6% forecast and at its highest level in three years. The increase was driven mainly by energy, where prices rose 18.8%, although core inflation also climbed from 2.4% to 2.5%, suggesting that price pressures may be starting to spread beyond volatile components.

Our Take

The data increase the possibility that the European Central Bank could raise rates again before year-end. Although the pickup remains concentrated in energy, persistent pressures could feed through to broader prices. The ECB therefore faces the challenge of containing inflation without deepening the region’s economic weakness.

France’s 2027 budget proposal presented yesterday failed to ease pressure on the country’s debt. The spread between French and German 10-year bonds is approaching 1.5 percentage points, its widest level since 2011, while the French yield is hovering around 4.93%. The move reflects a growing loss of investor confidence in the government’s ability to address its fiscal imbalances.

Our Take

If Paris fails to stabilize its public finances, tensions could spill over into the rest of Europe through higher borrowing costs, weaker fiscal discipline and reduced regional leadership capacity. The uncertainty has already reached FX markets, with the euro at a 16-month low against the dollar and bearish positioning against the currency increasing.

Corporate News

Anthropic is seeking to go public as soon as mid-November, at a valuation that could reach as much as $2 trillion. The deal would test investor appetite for AI and the sector’s growth expectations.

Paramount bonds plunged just hours after the company issued $52 billion in debt to finance the largest acquisition in Hollywood history. The selloff reflects investor concerns over elevated leverage and integration risks.

Nike shares fell 10% as a deepening sales slowdown tests investor patience with CEO Elliott Hill. The company will consolidate operations and cut jobs to save $2.5 billion over the next five years.

The To-Do List

  • Watch developments in France’s bond-market turmoil given the risk of spillovers across the rest of the eurozone, which institutional investors themselves are increasingly acknowledging.

  • Keep an eye on oil prices, which are falling Friday after reports that European Union member states are discussing a potential release of additional crude and diesel reserves.

  • Complete 3 rounds of 15 squats, 10 wall push-ups, 20 calf raises and 30 seconds of fast marching in place. Rest 30 seconds between rounds.

  • Remember that today marks another anniversary of the birth, in 1900, of Arturo Rosenblueth Stearns, a prominent Mexican scientist, pioneer in cybernetics and close collaborator of mathematician Norbert Wiener.

Today’s Recommendation…

For the weekend, we recommend watching DTF St. Louis, a seven-episode HBO Max miniseries that blends dark comedy and mystery around a love triangle involving adults in the middle of a midlife crisis. Starring Jason Bateman, David Harbour and Linda Cardellini, the story combines absurd decisions, unfulfilled desires and a crime that complicates everything. Ideal for anyone who does not want to commit to a long-running series.