Inflation in Mexico Moderated During the First Half of December
In the first half of December 2024, inflation, or the National Consumer Price Index (INPC), saw an increase of 0.42% compared to the previous fortnight. With this rise, the annual inflation rate stood at 4.44%, marking three consecutive fortnights of decline. These figures are lower than those recorded in the same period last year, when the fortnightly inflation was 0.52% and the annual rate reached 4.46%. However, analysts had forecasted a rate of 4.40%, according to a Reuters survey. The National Institute of Statistics and Geography (Inegi) states that the purpose of the INPC is to measure the variation in prices of a basket of goods and services representative of the consumption of Mexican households, specifically that of an average urban consumer.
Although it has slowed down, inflation remains above the Banco de México's (Banxico) target of 3%, with a margin of one percentage point. This implies that this index is projected to stay outside the established range for 45 months by the end of 2024. Inflation has been outside parameters since April 2021 and is expected to continue this way until 2026, representing the longest inflationary period in Mexico's recent history. A report by Capital Economics emphasized that the decrease in inflation during this first half of December gives Banco de México the opportunity to continue loosening its monetary policy. "However, we anticipate that it will keep cutting at a pace of 25 basis points, rather than rushing as it suggested in its recent meeting last week," they clarified. Meanwhile, Citibanamex forecasts that inflation will follow a gradual downward trend, maintaining its estimates for the overall annual inflation and core inflation at 4.4% and 3.8%, respectively, by the end of 2024, and at 3.9% and 3.7%, respectively, for 2025. Regarding core inflation, which is considered a more accurate indicator of price trends because it excludes highly volatile items, there was an unexpected increase to 3.62% from 3.57% in the second half of November. The market had expected it to fall to 3.56%. Within the core parameter, costs for educational services (tuition) had the most significant impact, increasing by 5.79% annually, while prices for food, beverages, and tobacco grew by 3.59% annually. In the non-core indicator, fruits and vegetables led the increase with an annual rise of 11.23%, followed by energy prices, which reported a 5.91% increase. The categories that saw the largest increases this fortnight were air transportation and tomatoes, while papaya and onions experienced the most significant declines. Information from Reuters.
It’s interesting to note that, despite the moderation in the inflation rate, prices in certain sectors such as education and food continue to pose a significant challenge for consumers. The Mexican economy, while showing signs of inflation slowdown, still faces risks that could affect the purchasing power of households. It’s crucial for consumers and businesses to keep a close eye on these economic changes to effectively adapt and avoid losses in their buying capacity.
