In the first half of July 2024, the National Consumer Price Index (INPC) in Mexico recorded a significant variation of 0.71% compared to the previous fortnight, according to the National Institute of Statistics and Geography (Inegi). This increase has pushed the annual general inflation rate to 5.61%, marking the highest level of inflation since the second half of May 2023.
The primary drivers behind this surge in biweekly inflation were the rising prices of several essential products and services. Key contributors included tomatoes, domestic LP gas, onions, eggs, avocados, low-octane gasoline (Magna), air transport, electricity, chayote, and oranges. These items collectively had a substantial impact on the overall inflation rate.
Conversely, the inflationary pressures were somewhat mitigated by the declining prices of other products. Notable among these were serrano chili, green tomatoes, cars, grapes, sugar, edible vegetable oils and fats, melon, papaya, guava, and pasteurized and fresh milk. These reductions helped to counterbalance the steep increases observed in other areas.
Underlying Inflation
The underlying price index, which excludes volatile items such as agricultural products and energy, provides a clearer picture of the medium-term inflation trend. In the first half of July, the underlying inflation index rose by 0.18% biweekly and by 4.02% on an annual basis. Within this category, merchandise prices experienced a modest biweekly increase of 0.02%, while service prices saw a more notable rise of 0.37%.
Non-Core Inflation
The non-core price index, which includes more volatile items, displayed a more pronounced increase, with a biweekly rise of 2.32% and an annual increase of 10.64%. Breaking this down further, agricultural product prices surged by 3.49% biweekly, and energy prices along with government-authorized tariffs increased by 1.21%.
On an annual basis, the prices of agricultural products showed a significant rise of 14.33%. Within this category, fruits and vegetables saw the highest increases at 25.69%, while livestock products experienced a more moderate rise of 4.82%.
Economic Implications
This rise in inflation presents a challenging economic environment for Mexico. Higher inflation rates can erode purchasing power and affect the cost of living for consumers, particularly those in lower-income brackets. The increases in essential goods such as food and fuel are likely to be felt most acutely by households already struggling with the economic impacts of previous inflationary periods and the broader global economic situation.
Government and Policy Response
In response to rising inflation, the Mexican government and monetary authorities may consider implementing measures to stabilize prices and control inflationary pressures. This could include adjusting interest rates, implementing fiscal policies to manage demand, and exploring strategies to increase supply and reduce bottlenecks in key sectors.
Looking Ahead
As Mexico navigates through these inflationary challenges, it will be crucial for policymakers to balance the need for economic growth with the imperative of maintaining price stability. Monitoring inflation trends and responding promptly to new data will be essential in crafting effective policies that protect consumers while fostering a stable economic environment.
The National Institute of Statistics and Geography (Inegi) will continue to play a critical role in providing accurate and timely data to guide these policy decisions. As new information becomes available, adjustments to economic strategies will be necessary to address the evolving inflationary landscape in Mexico.
