Mexico's July consumer price index (CPI) was up 4.1% from the
same month one year earlier, after increases of 3.8% in June and
3.5% in both May and April. According to the report, the rise
in inflation during July stemmed mostly from a jump in prices for
food products such as tomatoes, onions, pork, and beef.
Excluding the volatile categories of fresh foods, energy, and
government-set prices, the July "core" CPI was up just 3.2%
year-over-year, after a rise of 3.1% in the year to June.
At the wholesale level, inflation rebounded strongly back to its
level two months ago. The July producer price index (PPI) was
up 2.8% year-over-year, after a rise of 2.0% in June.
The report was released on Thursday by INEGI, the official
Comment: After jumping in
response to new sales taxes at the beginning of the year, Mexican
inflation posted an encouraging moderation during the spring.
The reacceleration of inflation during the summer has therefore
been quite a disappointment for many Mexicans. Rising prices
are probably one key reason for the big pullback in the July
consumer confidence index, released earlier this week.
Looking forward, the dramatic plunge in the peso since late July
has the potential to raise the cost of many imported items, pushing
overall inflation even higher. Stronger exports have recently
given a boost to the Mexican economy, but if rising inflation
continues to hurt consumer confidence and spending, the
acceleration in economic growth will be limited.
Patrick Fearon, CFA
Vice President, Fund Management