Inflation at its highest level since May 2023

Mexico City. Inflation in Mexico accelerated for the fifth consecutive month, reaching an annual rate of 5.57 percent in July, the highest increase in consumer prices since May 2023, according to data from the National Institute of Statistics and Geography (Inegi).

The largest increase was again in fruits and vegetables, with an annual increase of 23.6 percent, its highest rise since August 2017, when it reached a rate of 25.82 percent, and in agricultural products, with 13.72 percent, its highest level since October 2022 (14.25 percent).

According to the National Consumer Price Index (INPC), released by Inegi, inflation in July had a monthly variation of 1.05 percent, above what was expected by the consensus of analysts in the Citibanamex survey, which placed it at 1.02 percent, so the estimate they had for July compared to the same month in 2023 was almost in line with the 5.5 percent they forecast.

Much of the pressure came from fresh foods, from fruits and vegetables to livestock (eggs and pork), and also from the rise in energy (gas, gasoline and electricity), which is why inflation in Mexico accelerated from 4.98 percent annually in June to 5.57 percent in July, once again moving away from the Bank of Mexico’s price stability goal for the 41st consecutive time.

Tomatoes had the greatest impact on July inflation, with a monthly increase of 33.34 percent, while domestic LP gas rose 6.7 percent; oranges, onions, low-octane gasoline and avocado increased 18.57, 25.08, 1.14 and 17.01 percent, in that order. Homeownership, eggs, lunch shops, sandwich shops, taco shops and pork rose 0.34, 3.67, 0.62 and 4.77 percent, respectively.

By consumption purpose, the food and non-alcoholic beverages sector reported the highest annual price increase in July, with 7.77 percent annually, compared to 5.57 percent for the INPC; followed by restaurants and hotels, with 6.42 percent; education, 6.37 percent; and housing and its services, 5.72 percent.

The core index, which excludes energy and fresh food from its calculations, and which determines the trajectory of prices in the medium and long term, increased by 0.32 percent at a monthly rate and 4.05 percent at an annual rate, its lowest level since February 2021.

The non-core price index, which includes volatile prices such as those of agricultural and energy products, registered a monthly increase of 3.29 percent and an annual increase of 10.36 percent, the highest since August 2022, and linking five months of increases.

Unsurprisingly, inflation continued to rise in July, jumping above 5.5 percent, mostly driven by non-core prices. Core inflation moved slightly lower, but still remains above 4 percent. Both measures will end the year above 4 percent.described Alfredo Coutiño, general director of Moody’s Analytics.

Increase in producer prices

Driven by agricultural, mining, manufacturing and transport producer prices, the national producer price index (INPP) continues to rise and recorded its highest annual increase since November 2022 in July.

Alejandro Saldaña, chief economist at Ve por Más, said that the cost of production extended its rebound in July, as it showed its highest growth in 20 readings, going from 5.06 to 5.46 percent annually. This was in line with the increase in the cost of maritime freight, the depreciation of the exchange rate and wage pressures. The cost of goods and services destined for final domestic consumption accelerated from 5.21 to 5.37 percent.