MexECON Blog

August CPI Rises 4.1 Percent YOY

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 agency.

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

CPI 1408

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