MexECON Blog

December CPI Rises 4.0 Percent YOY

Mexico's December consumer price index (CPI) was up 4.0% from the same month one year earlier, compared with year-over-year increases of 3.6% in November and just 3.4% in both October and September.  As a result, the country's inflation rate in full-year 2013 was the highest since 2010.  Much of the acceleration in December came from a spike in energy prices, as the government continued to cut fuel subsidies.  However, even excluding the volatile categories of fresh foods, energy, and government-set prices, the December "core" CPI was up 2.8% year-over-year, for its biggest increase since June.

At the wholesale level, inflation also accelerated markedly, though it remained relatively tame.  The December producer price index (PPI) was up 1.6% from one year earlier, after a rise of 1.1% in November.

Comment:  Inflation has clearly been accelerating in Mexico, and it could continue to do so in early 2014.  Not only is the government continuing to cut subsidies, but new sales taxes were implemented at the beginning of the year.  Accelerating prices are likely one reason for the ongoing slide in Mexican consumer confidence.  The economy will probably keep growing on the strength of improved international trade and increased manufacturing activity, but higher inflation is likely to discourage consumer spending in the near term.

Patrick Fearon, CFA
Vice President, Fund Management

CPI 1312 B

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