Mexico Inflation May 2016


Inflation rises for the first time since February

In May, consumer prices fell 0.45%, which was a faster decrease than the 0.32% drop observed in April. Markets had expected a 0.46% decrease and, according to the National Statistics Institute, May’s monthly drop—the fastest in 12 months—is largely the result of seasonal factors. At this time of the year, the drop in prices reflects discounts in electricity tariffs due to the start of the summer season. In addition, prices for fresh food dropped substantially over the previous month.

Inflation inched up from 2.5% in April to 2.6% in May, which marked the first increase since February. The result was in line with the Central Bank’s view that inflationary pressures remain contained for now and that inflation continues to hover below its target of 3.0%.

Closely-watched core consumer prices—which exclude volatile categories such as fresh food and energy—increased 0.21% in May over the previous month, which came in slightly below the 0.22% rise registered in April. Core inflation ticked up to 2.9% in May (April: 2.8% year-on-year).

The Central Bank (Banxico) sees inflation rising slightly above 3.0% in the second and third quarters of 2016, before ending the year close to 3.0%. In 2017, Banxico expects inflation to stabilize around its 3.0% target. Panelists surveyed for this month’s LatinFocus Consensus Forecast expect inflation to end 2016 at 3.3%, which is down 0.1 percentage points over last month’s forecast. For 2017, the panel sees year-end inflation at 3.3%.

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Mexico Inflation Chart

Mexico Inflation May 2016

Note: Month-on-month and year-on-year changes of consumer price index (CPI) in %.
Source: Mexico National Statistics Institute (INEGI).

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