MexECON Blog

August CPI Rises 3.5 Percent YOY

Mexico's August consumer price index (CPI) was up 3.5% from the same month one year earlier.  That matched the rise in July, but it was much lower than the increases of 4.1% in June and 4.6% in both May and April.  Inflation in Mexico is now at its lowest since January.  Price hikes actually accelerated in August for some products, such as tomatoes, onions, and gasoline, but that was offset by slowing inflation for other products.  Excluding the volatile categories of fresh foods, energy, and government-set prices, the August "core" CPI was up just 2.4% year-over-year, after an increase of 2.5% in the year to July.

At the wholesale level, inflation continued its remarkable slide.  The August producer price index (PPI) was up just 0.9% year-over-year, after increases of 1.0% in July and 1.1% in June.

Comment:  Even though Mexico's overall consumer inflation stabilized in August, the drop in core inflation and the continued decline in producer inflation show that price pressures continue to ease.  That allowed Banco de México to cut interest rates unexpectedly last week to address the recent slowdown in economic growth.  Several indicators suggest the Mexican economy is headed toward recession, and the central bank is clearly concerned.  Fortunately, falling inflation will not only give the monetary policymakers room to maneuver on interest rates, but it could also encourage consumers to start spending more aggressively again.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1308

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