Mexico's May consumer price index (CPI) was up 3.9% from the
same month one year earlier, accelerating sharply from a rise of
3.4% in the year to April. Nevertheless, inflation remained
slightly lower than its recent peak at the beginning of the
year. According to the report, from the official statistics
agency INEGI, the acceleration in April stemmed mostly from a surge
in prices for fresh foods such as tomatoes and chiles.
Excluding fresh foods, energy, and administratively-determined
prices, the May "core" CPI was up just 3.5% year-over-year, after a
rise of 3.4% in the previous month.
Inflation at the wholesale level also jumped in May, and it
remained much higher than consumer inflation. The May
producer price index (PPI) was up 6.8% year-over-year, after a rise
of 5.7% in the year to April.
Comment: In spite of the jump in
inflation during May, the outlook for price stability in Mexico is
now much more benign than it was in late 2011. Weather
conditions and international security events still have the
potential to cause volatility in non-core categories, and the
recent plunge in the value of the peso will likely put some upward
pressure on prices. However, weakening demand in Europe and
Asia seems likely weigh on Mexican economic growth and prevent
inflation from getting out of hand.
Patrick Fearon, CFA
Vice President, Fund Management