MexECON Blog

November CPI Rises 3.6 Percent YOY

Mexico's November consumer price index (CPI) was up 3.6% from the same month one year earlier, compared with year-over-year increases of 3.4% in both October and September.  Part of the acceleration in November reflected the government's ongoing program to reduce subsidies for energy products such as electricity and gasoline.  Just as important, however, were increased costs for agricultural products such as tomatoes, onions, chiles, and eggs.  Excluding the volatile categories of fresh foods, energy, and government-set prices, the November "core" CPI was up just 2.6% year-over-year.

At the wholesale level, inflation also accelerated, but it remained very weak.  The November producer price index (PPI) was up just 1.1% from one year earlier, after increases of 1.0% in each of the two previous months.

The report was released today by INEGI, the official statistics agency.

Comment:  Despite the acceleration in prices during November, inflation in Mexico remains much milder than its recent peaks above 4.5% in early 2013 and in late 2012.  The decline in inflation allowed Banco de México to cut interest rates three times in the last year, providing meaningful support to the slowing economy.  However, even the monetary policymakers acknowledge that inflation will likely remain around 3.5% in the near term, and it could even accelerate a bit further when recently passed sales-tax hikes take effect at the beginning of 2014.  The policymakers do not expect inflation to fall to their goal of 3.0% until 2015.  The continued price hikes are likely to be a further headwind for consumer demand and overall economic growth in Mexico.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1311

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