MexECON Blog

October CPI Rises 4.6 Percent YOY

Mexico's October consumer price index (CPI) was up 4.6% from the same month one year earlier.  In September, the CPI had been up 4.8%, marking its fastest increase in two and a half years.  According to the report, from the official statistics agency INEGI, the fall in inflation during October came from more subdued price hikes for both food and energy.  The report even showed big price declines for some items, including oranges, avocados, potatoes, and beans.  Excluding the volatile fresh foods, energy, and government-set prices, the October "core" CPI was up 3.6% year-over-year, just as it was in September.

Comment:  Inflation has surged in Mexico this year, driven in large part by drought and an outbreak of avian influenza that decimated poultry flocks.  The rise in prices probably also reflects the relatively weak peso and Mexico's extraordinarily strong economic growth.  Against this backdrop, the cooler inflation in October is encouraging.  There is some chance that inflation could now start a meaningful downward trend, since the impact of the drought and avian influenza should dissipate over time.  Nevertheless, one month does not make a trend.  Even if food supply shocks fade, the low peso and fast economic growth could still put upward pressure on prices.  It will therefore take a few more months to gauge where inflation is really going.  In the meantime, monetary policymakers at Banco de México will probably continue to consider the possibility of raising interest rates in 2013. 

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1210

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