Mexico's August consumer price index (CPI) was up 4.1% from the
same month one year earlier, matching the increase in July and
keeping inflation at its highest level since February.
According to the report, prices eased for natural gas and some
other energy products in August, which helped reduce inflation
pressures. However, that was offset by accelerating prices
for some personal products and other goods. Excluding the
volatile categories of fresh foods, energy, and government-set
prices, the August "core" CPI was up 3.4% year-over-year, after
gains of 3.2% in July and 3.1% in June.
At the wholesale level, inflation accelerated to its highest
level in almost two years. The August producer price index
(PPI) was up 3.3% year-over-year, after increases of 2.8% in July
and just 2.0% in June.
The report was released today by INEGI, the official statistics
Comment: Accelerating inflation
has been one factor weighing on Mexican consumer confidence in
recent months, and today's report suggests it could continue to be
a problem. The rise in goods prices is evidence that the
peso's decline this summer could be boosting costs for imported
products. Meanwhile, the rapid acceleration in producer
prices is a sign that there is increased inflation pressure in the
pipeline. These unexpected inflation trends make it clear
that Banco de México's next policy move will probably be to raise
interest rates, though the timing remains uncertain. In the
meantime, if high prices continue to discourage consumer spending,
the ongoing rebound in Mexican economic growth may be limited.
Patrick Fearon, CFA
Vice President, Fund Management