MexECON Blog

March CPI Rises 4.3 Percent YOY

Mexico's March consumer price index (CPI) was up 4.3% from the same month one year earlier, after increases of 3.6% in February and 3.3% in January.  The inflation rate in March was the highest since last autumn.  According to the report, released today by the official statistics agency INEGI, the acceleration in the third month of the year came mostly from higher prices for food products such as eggs and chicken.  Excluding the volatile categories of fresh foods, energy, and government-set prices, the March "core" CPI was up just 3.0% on the year, matching its increase in February.

In contrast to the situation at the retail level, inflation at the wholesale level cooled.  The March producer price index excluding petroleum (PPI) was up just 1.8% year-over-year, compared with a rise of 2.1% in the year to February.

Comment:  The March data suggests Mexican inflation could once again spike in response to food supply shocks.  A recent discovery of avian influenza in Mexico led to the mass culling of flocks and tightened supplies of eggs and chicken, which explains the big price jumps for those products last month.  Fortunately, any such price spike is likely to be transitory.  When avian influenza and drought pushed Mexican food prices higher in mid-2012, the phenomenon dissipated by the end of the year.  The March slowdown in wholesale inflation also suggests there are few price pressures in the pipeline.  It is true that a third straight acceleration in core consumer services inflation during March could point to building price pressures, perhaps engendered by the recent flood of foreign capital into Mexico, but it is too early to know for sure.  For now, the outlook for Mexican inflation appears benign.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1303

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