MexECON Blog

July CPI Rises 4.4 Percent YOY

Mexico's July consumer price index (CPI) was up 4.4% from the same month one year earlier, accelerating from year-over-year increases of 4.3% in June, 3.9% in May, and 3.4% in April.  Mexico's inflation rate now stands at its highest since December 2010.  According to the report, issued Thursday by the official statistics agency INEGI, prices for fresh foods, energy, and administratively-controlled goods continued to grow rapidly in July, posting a year-over-year increase of 7.3% for the second straight month.  Excluding those volatile categories, the July "core CPI" was up just 3.6% year-over-year, but that represented a small acceleration from the core inflation of 3.5% in each of the previous two months.

Starting with the report for July, the statistics agency has started to calculate inflation at the wholesale level using a new producer price index (PPI) that excludes petroleum and is based on prices in June 2012.  Because this new index excludes petroleum prices, it does not seem directly comparable to the overall CPI.  I will therefore exclude it from my inflation chart (below) until I have a better feel for how the two indexes relate to each other.  According to the report, the July PPI ex-petroleum was up 4.5% year-over-year.

Comment:  Late last year and early this year, the previous version of Mexico's PPI had been running well ahead of the CPI, suggesting significant inflation pressures in the pipeline.  Inflation at the consumer level never took off to the extent the previous PPI implied, but the acceleration in the last couple of months could be a sign that faster price increases may now be taking hold.  Nevertheless, Banco de México has made forceful arguments that inflation is actually well contained.  The central bank notes that Mexican inflation has accelerated primarily for globally traded goods that would naturally become more expensive as a result of the peso's recent weakness, while inflation for domestic services remains much more subdued.  Moreover, slowing economic growth around the globe will tend to hold inflation pressures down.  It will probably take a few months more data to tell whether Mexican inflation is really under wraps, or if accelerating price hikes had been merely delayed.

Patrick Fearon, CFA
Vice President, Fund Management

 CPI 1207

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