MexECON Blog

May Inflation Falls to 2.9 Percent

Mexico's May consumer price index (CPI) was up just 2.9% from the same month one year earlier, after increases of 3.1% in each of the previous two months.  According to the report, the drop in inflation during May came mostly from lower prices for a range of agricultural goods, including eggs, tomatoes, and onions.  Excluding the volatile categories of fresh foods, energy, and government-set prices, the May "core" CPI was up just 2.3% year-over-year, matching the record low reached in both April and January.

At the wholesale level, the May producer price index (PPI) was up 2.3% year-over-year, after an increase of 2.8% in the year to April.

The report was released last week by INEGI, the official statistics agency.

Comment:  Along with lower unemployment, tame prices have the potential to encourage consumer spending in Mexico, which would help offset some of the recent softness in exports, manufacturing, and construction.  Low inflation also could allow Banco de México to put off any interest rate hikes in the near term.  The central bank is still likely to raise rates in response to a hike in U.S. interest rates that is expected later this summer, but well-behaved prices mean that it can potentially wait until later in order to do so.

Patrick Fearon, CFA
Portfolio Manager

CPI 1505

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