MexECON Blog

September CPI Rises 3.1 Percent YOY

Mexico's September consumer price index (CPI) was up just 3.1% from the same month one year earlier, slowing from the year-over-year increases of 3.4% in August and 3.5% in July.  Mexican inflation is now running at its lowest rate since briefly touching the central bank's target of 3.0% in March.  According to today's report, from the official statistics agency INEGI, much of the decline in inflation during September stemmed from moderating prices for fresh foods, most notably avocados, tomatoes, plantains, and chicken.  Excluding the volatile categories of fresh foods, energy, and administratively-determined prices, the September "core" CPI was also up just 3.1% year-over-year, compared with a rise of 3.2% in the year to August.

At the wholesale level, inflation remained much higher than at the retail level.  The September producer price index (PPI) increased a strong 7.7% year-over-year, up from a rise of 6.7% in August.  Producer inflation in Mexico has now accelerated for four straight months, and it stands at its highest level since late 2008.

Comment:  Mexico's unusual, crop-destroying freezes last winter continue to put some upward pressures on food prices, but those pressures are clearly dissipating.  In addition, the global economic slowdown has helped bring down a broad range of commodity prices, and concern about slowing growth is probably helping to hold down wage pressures.  Mexico still faces some upward price pressures from the recent sharp decline in the peso and the simple fact that its economy continues to grow at a relatively good pace.  Nevertheless, the most likely scenario is that the country's inflation rate will remain roughly stable in the near term.  That should allow Banco de México to keep interest rates at their current low levels in order to buttress the economy against the global slowdown.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1109

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