Mexico's September consumer price index (CPI) was up 3.4% from
the same month one year earlier. That followed year-over-year
increases of 3.5% in both August and July and 4.1% in June.
It was also far below the most recent peak inflation rate of 4.6%
during the spring. The decline in inflation during September
mostly reflected cooler prices for fresh foods such as avocados,
potatoes, melons, and chicken. Excluding the volatile
categories of fresh foods, energy, and government-set prices, the
September "core" CPI was up 2.5% year-over-year, after an increase
of 2.4% in the year to August.
At the wholesale level, inflation remained muted. The
September producer price index (PPI) was up just 1.0%
year-over-year, in line with the increases of 0.9% in August and
1.0% in July.
Comment: The easing in Mexico's
inflation rate could not come at a better time. Cooler
inflation was a key reason why Banco de México was able to cut
interest rates in September to help arrest a precipitous softening
in economic growth, and the continued fall in inflation could now
help encourage consumers to start buying more aggressively
again. The easing in food prices should be especially helpful
on that front. The Mexican economy still looks like it is at
risk of slipping into recession, but if consumer demand
strengthens, any recession is likely to be short and shallow.
Patrick Fearon, CFA
Vice President, Fund Management