MexECON Blog

July CPI Rises 3.6 Percent YOY

Mexico's July consumer price index (CPI) was up 3.6% from the same month one year earlier, according to a report from Banco de México.  In June, the CPI had been up 3.7% year-over-year, and in May, the CPI had been up 3.9% year-over-year.  The country's inflation rate has now fallen for four straight months, erasing the resurgence in inflation at the beginning of the year.

Comment:  Renewed declines in inflation are welcome because they bring the headline rate closer to the central bank's goal of 3.0% and therefore help ensure that monetary policymakers can leave interest rates low in order to support the economic recovery.  On the other hand, the renewed decline in inflation probably reflects the worrisome slowdown in Mexico's economic growth.  U.S. inventory rebuilding is apparently slowing down, and consumer and corporate demand in the United States are still not growing rapidly.  As a result, Mexican export growth has moderated, as has industrial activity.  The principal risk is that Mexico's current strong economic recovery could falter if the export and industrial sectors slow down before other sectors can take up the slack.

Patrick Fearon, CFA
Vice President, Fund Management

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