MexECON Blog

January CPI Rises 3.3 Percent YOY

Mexico's January consumer price index (CPI) was up just 3.3% from the same month one year earlier, for the lowest inflation rate since October 2011.  Mexican inflation hit its most recent peak of 4.8% in September 2012, but it has fallen every month since then.  According to the report, released Thursday by the official statistics agency INEGI, the fall in inflation during January came mostly from weaker prices for fresh foods such as tomatoes, peppers, and eggs.  Excluding the volatile categories of fresh foods, energy, and government-set prices, the January "core" CPI was up 2.9% year-over-year, matching its increase in December.

At the wholesale level, inflation ticked up a bit, but remained low.  The January producer price index excluding petroleum (PPI) was up 1.6% year-over-year, after a gain of 1.5% in the year to December.  Prices for wholesale goods eased in January, but price increases accelerated for services.

Comment:  Drought and an outbreak of avian influenza drove up Mexican food costs in mid-2012, but the impact of those supply shocks has now dissipated.  The relatively low level of core inflation and the very weak pricing at the wholesale level suggest overall inflation will remain moderate in the near term and perhaps fall even further.  That should help bolster consumer confidence and spending.  Just as important, it will allow Banco de México to keep interest rates low in order to shield the economy from foreign risks and discourage destabilizing capital inflows.  If economic growth slows further, the central bank might even cut rates.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1301

0 comment(s) for “January CPI Rises 3.3 Percent YOY”

    Leave a Comment