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, accelerating from the year-over-year increases of 3.3% in June and 3.2% in May.  The inflation rate is now at its highest since February.  According to the report, from the official statistics agency INEGI, the rise in inflation during July came in large part from a jump in prices for avocados, tomatoes, chicken, and gasoline.  Excluding the volatile categories of fresh foods, energy, and administratively-determined prices, the July "core" CPI was up just 3.2% year-over-year, matching its rise in June.

Comment:  With world financial markets skidding and the peso weakening dramatically, inflationary pressures could remain for a while in Mexico.  Nevertheless, the recent drop in global commodity prices should take much of the wind out of non-core inflation, and any slowdown in real economic activity would also help hold down prices.  In fact, rising unemployment in Mexico could be a harbinger of moderating inflation in the months to come.  That is especially important because it should allow Banco de México to keep interest rates at their current low levels in order to buttress the economy against the global economic slowdown.

Patrick Fearon, CFA
Vice President, Fund Management

                                   Mexico's Consumer Price Index (CPI)
                                       Percent Change, Year-Over-Year
                                                        Source:  INEGI
CPI 1107

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