MexECON Blog

August CPI Rises 4.6 Percent YOY

Mexico's August consumer price index (CPI) was up 4.6% from the same month one year earlier, after a year-over-year increase of just 4.4% in July.  The country's inflation rate has now accelerated for four straight months, leaving it at its highest level since March 2010.  According to the report, from the official statistics agency INEGI, the increase in inflation during August once again came primarily from strong price hikes for fresh foods, such as eggs and oranges.  Prices for fresh foods were up 11.8% year-over-year.  Energy costs were also up strongly, standing 5.2% higher than one year earlier.  Even outside those volatile categories, however, inflation accelerated.  Excluding fresh foods, energy, and administratively-controlled prices, the August "core CPI" was up 3.7% year-over-year, after a rise of 3.6% in July and 3.5% in each of the two months before that.

Comment:  An outbreak of avian influenza in Mexico has reduced the country's flocks, raising prices for eggs, chicken, and related products.  In addition, drought conditions throughout North America have raised grain prices.  Those problems are likely to dissipate in the coming months and quarters, but factors such as Mexico's strong economic growth rate and past declines in the peso could keep price pressures high.  Banco de México continues to make cogent arguments as to why inflation is likely to remain under control, but it noted today that price hikes are likely to stay above 4.0% for the time being.  It may take several more months before the true trend in Mexican inflation becomes clear.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1208

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