Mexico’s inflation surged in July 2024 to 5.57 percent, the highest since May 2023. This rate exceeded previous forecasts and was higher than any level seen on the market.
The significant increase, from just 4.98% in July, highlights the increasing economic pressures in the country.
This increase can be attributed largely to the sharp increases in prices of essential goods and services such as housing, food, education, or other necessities.
Inflation: the main drivers
According to the Instituto Nacional de Estadistica y Geografia, (INEGI), Mexico’s rising inflation is largely due to the rising cost of non-alcoholic drinks and food.
The prices in this category jumped from 6.54 % to 7.77 % between June and July.
The cost of fruit and vegetables has risen dramatically, from 197% to 23.5% in the last month. This is having a significant impact on consumer spending.
Inflation was also influenced by sectors like education, housing, utilities, hotels and restaurants, as well as miscellaneous goods and services.
The inflation rate in restaurants and hotels decreased slightly from 6.4% to 6.42 %, but education costs rose by 6.37%.
In contrast, inflation in the miscellaneous sector fell from 5.79 % to 5.54%.
Housing and utilities saw a significant increase in the sector from June, 4.52% to July, 5.72%. This reflects broader challenges facing consumers.
The core inflation rate and its monthly variation
Core inflation (a measure that excludes volatile energy and food prices) has decreased slightly for 18 consecutive months, reaching 4.05%.
The core inflation rate is at its lowest since February 2021, and it’s in line with expectations.
Consumer Price Index (CPI), the monthly measure of consumer prices, increased by 1.05% during July. This was the largest increase in almost three years. It also exceeded the 1.02% expected.
The Core CPI rose 0.32%, which is slightly higher than the 0.29% expected, and indicates that inflationary dynamics are complex in Mexico.
Comparison of Inflation Rates
The rate of inflation in Mexico rose from 4.69% to 4.98% in June. This was due to the drop in peso after elections and political unrest.
The increase in prices was due to a rise of costs for various CPI categories including education, housing, non-alcoholic drinks, hotels and restaurants, food, as well as other CPI categories.
This upward trend is mainly driven by the increase in non-alcoholic drinks and food, particularly fruits and vegetables.
Restaurants and hotels, housing and utilities, education and other sectors are also important contributors.
While the core inflation rate dropped to 4.13 % in June, this further decreased to 4.05% by July.
The continued decline reflects an overall stability in core inflation indicators despite economic external pressures.
The monthly data show a sharp contrast between the months of June and July. CPI increased by 0.38 % in June, but jumped to 1.05 % in July. This is the biggest increase since almost three years.
The core CPI increased slightly from 0.22% to 0.32%, which is above the market expectation and highlights the varying pressures on inflation.
Recent sharp increases in inflation highlight significant challenges facing the economy, especially in key sectors.
Analysts and policymakers will have to monitor closely these trends in order to understand the implications of Mexico’s rising inflation and the wider economic impact.
As new information becomes available, this post may change.
