MexECON Blog

June CPI Rises 4.1 Percent YOY

Mexico's June consumer price index (CPI) was up 4.1% from the same month one year earlier.  That was the country's lowest inflation rate since February, and it marked a significant slowdown from the increases of 4.6% in each of the previous two months.  Much of the cooling in inflation during June came from a pullback in prices for agricultural goods such as tomatoes, onions, lemons, and eggs.  Excluding the volatile categories of fresh foods, energy, and government-set prices, the June "core" CPI was up just 2.8% year-over-year, compared with increases of 2.9% in each of the previous two months.

At the wholesale level, inflation reached yet another record low.  The June producer price index (PPI) was up just 0.6% year-over-year, after increases of 0.8% in May, 1.4% in April, and 1.8% in March.

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

Comment:  In recent months, Mexican consumer inflation had been boosted by food supply shocks, but many observers expected the impact of those shocks to be transitory.  Today's report suggests those observers were correct.  Going forward, the relative stability in core inflation and the continued cooling in wholesale prices provide some assurance that inflation could ease further.  That would help encourage Mexican consumers to start spending more freely again, and it could allow policymakers at Banco de México to cut interest rates further if necessary to support the economy.  New rate cuts are certainly not imminent, especially with global capital retreating from the emerging markets and the peso down sharply since the spring.  Nevertheless, a continued decline in inflation would make it easier for the policymakers to cut rates if economic growth faltered.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1306

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