MexECON Blog

November CPI Rises 4.2 Percent YOY

Mexico's November consumer price index (CPI) was up just 4.2% from the same month one year earlier, after increases of 4.6% in October and 4.8% in September.  Inflation in Mexico is now at its lowest since May.  According to the report, from the official statistics agency INEGI, the fall in inflation during November was broad based.  Some of the decline came from lower prices for fresh foods, such as tomatoes, potatoes, eggs, and beans.  But even excluding the volatile fresh foods, energy, and government-set prices, the November "core" CPI was up just 3.3% year-over-year, compared with a rise of 3.6% in each of the two prior months.  The decline in the core CPI came mostly from a sharp drop in mobile telephone rates.

Comment:  Mexican food inflation has now fallen for two straight months, suggesting the impact of earlier supply shocks may finally be dissipating.  Over at least the last year, drought and an outbreak of avian influenza has restricted supplies and pushed up prices for a number of products, but that process may now be reversing.  Among the non-core categories, press reports suggest November's annual "Buen Fin" holiday sales included particularly aggressive markdowns this year.  That could mean that the modest slowdown in Mexico's economic growth may be prompting sellers to hold prices down.  Continued cooling of inflation would be especially welcome right now, as high prices have been undermining consumer confidence and threatening to erode consumption demand.  Cooler inflation would also help forestall any move by Banco de México to raise interest rates in 2013.  It should be possible to tell if Mexican inflation is really calming down in the next couple of months.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1211 Corrected

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