MexECON Blog

April CPI Rises 3.4 Percent YOY

Mexico's April consumer price index (CPI) was up 3.4% from the same month one year earlier, after a gain of just 3.0% in the year to March.  According to the report, from Banco de México, the rebound in inflation during April came mostly from higher prices for fresh foods.  Excluding the volatile categories of food, energy, and administratively-determined prices, the April "core" CPI was up 3.2% year-over-year, just as it was in March.  The April producer price index (PPI) was up 3.9% year-over-year, after being up just 3.4% in the year to March.  The central bank ascribed that acceleration mostly to more expensive airline tickets associated with the late Easter holiday.

Comment:  As suggested by this blog last month, the low inflation in Mexico last month was probably not destined to last.  Indeed, the big disparity between producer inflation and consumer inflation suggests the CPI could continue to accelerate for a while.  Nevertheless, Mexican inflation has come down dramatically from its cycle peak of 6.5% in December 2008, and even with the rebound in April, inflation remains at its second-lowest level in almost five years.  Moreover, there is probably enough slack in the economy to keep inflation in a comfortable range in the coming months.  In this environment, Banco de México should be able to keep interest rates at their current low levels in order to support the country's economic recovery and take some upward pressure off the peso.

Patrick Fearon, CFA
Vice President, Fund Management

                                   Mexican Consumer Price Index (CPI)
                                       Percent Change, Year-Over-Year
                                             Source:  Banco de México
CPI 1104

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