Inflation in Mexico
Mexico - Inflation
Mexico’s national index of consumer prices (CPI) is the measure for evaluating the inflation rate in the Mexican economy at a national level (Inflation). Mexico’s National Institute of Statistics and Geography (INEGI) publishes inflation figures on a monthly basis. FocusEconomics regularly publishes news on Mexican inflation (Inflation). The table below shows the annual variation of CPI for Mexico, which is also referred to a Mexico’s inflation rate. A more complete assessment of Mexico inflation can be found below the table.
Mexico - Inflation Data
|Inflation Rate (CPI, annual variation in %)||3.8||4.0||2.7||2.8||6.0|
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Mexico Inflation Chart
Source: Mexico National Statistical Institute (INEGI).
OverviewInflation is commonly defined as the generalized and sustained increase of the Consumer Prices Index (CPI), which is a weighted average of prices for different goods. It is the headline macroeconomic indicator to evaluate the country’s inflation rate (see our Inflation page for more information on this indicator).
Data for consumer prices (CPI) in Mexico are elaborated by the National Institute of Statistics and Geography (INEGI) and are based on the Households’ Income and Expenditure National Survey (ENIGH 2010).
Mexico’s Inflation Performance
In the decades preceding the year 2000, Mexico experienced various episodes of high inflation. In the period between 1980 and 1989, Mexico registered inflation rates that appeared to be out of control. The average inflation rate recorded during this period was 69.9% and the highest inflation rate ever seen in Mexico was recorded in February 1988, at which time inflation reached 179.7%. These 10 years of disproportionately high inflation rates were the result of chronic fiscal deficits, internal and external economic imbalances as well as currency devaluations. From 1990 to 1999, Mexico registered an average inflation rate of 20.5%, with a peak registered in December 1995 (51.9%), following the Tequila Crisis in 1994, which was a currency crisis sparked by the Mexican government’s sudden devaluation of the peso against the U.S. dollar. Finally, in the 2000 and 2009 period, the average inflation rate was 5.2%. In more recent years, inflation has registered single-digit rates. This period of stable and low inflation is mainly the result of the 1993 constitutional reform that granted more autonomy to the Central Bank. The Central Bank decided to adopt an inflation targeting policy in 1999 and implemented it gradually until it was formally applied in 2001. In 2003, the Central Bank established medium-term inflation target of 3.0%.
How Does Mexico’s Inflation Perform?
In Mexico, inflation registers seasonal patterns. Inflation tends to increase at the beginning of each year as the government usually modifies taxes and adjusts tariffs. Businesses also generally adjust prices at the beginning of the year. In September, inflation rises more than normal in response to higher tuition fees, which tend to increase at the beginning of the school year. In October and November, higher energy prices (particularly for electricity) have a notorious impact on inflation, as the summer subsidies for electricity prices end. Conversely, energy prices usually fall and therefore inflation moderates in April and May, as the summer season begins and subsidies are implemented. Smaller variations in consumer prices, and thus a stable evolution of inflation, usually appear in the mid-year months, whereas large increases can be observed in December, which are associated with Christmas and employees receiving their end-of-year bonuses (Aguinaldo). Also notable are changes in prices for package tours and hotels, which occur at the beginning and end of the holiday season.
When are Mexican Inflation Data Released?
INEGI publishes inflation data on a monthly basis. The Institute discloses CPI data on the 9th and 24th of each month through a press release, provided that these are working days; if not it publishes the data on the working day prior to these dates. On the 9th of each month, INEGI presents inflation data for the previous month for the national CPI, the core inflation index, the special indices and various breakdowns. The Institute also publishes the producer price index (PPI) for finished goods and services for the previous month. On the 24th of each month, the Institute publishes data for consumer prices for the first 15 days of the current month. A detailed release calendar is available on the National Institute of Statistics and Geography website.
How are Mexican Inflation Figures Computed?
The CPI is elaborated from ENIGH 2010 which collects prices for 283 generic goods and services in the economy. The survey comprises a sample of resident households distributed throughout 46 cities among the country’s 32 federal states, with historical data reaching back to 1955.
Selected cities include small cities (from 20,000 to 120,000 inhabitants), medium cities (120,000 up to 600,000) and large cities (over 600,000). National coverage allows for a regional breakdown into seven regions. Regarding the object of expenditure, the 283 generic goods and services that are tracked are traditionally grouped into the following eight subcategories with their corresponding weighs in parenthesis: General Index (100%), Food, beverages and tobacco (23.14%), Clothing and footwear (5.65%), Housing (28.48%), Furniture and household appliances and accessories (4.40%), Health and personal care (7.28%), Transport (13.57%), Education and leisure (9.69%), and Other services (7.74%).
For a more analytical assessment, inflation data are broken down into two sub-indices: core and non-core. Core inflation excludes those generic goods and services whose prices exhibit high volatility or are affected by seasonal influences (agricultural prices, energy and government fees). Core inflation is usually important for evaluating medium-term trends in prices and as a reference for the implementation of monetary and fiscal policies .
When broken down into core and non-core inflation, core inflation is divided into goods and services and non-core inflation into agricultural products and prices for energy and government tariffs. The break-down in the non-core subcomponent is also important as prices for agricultural goods contain high volatility and their variation mainly reflects weather-related effects. Conversely, energy prices and government tariffs are administered prices, which mainly reflect economic policy or political criteria.
How Accurate are Mexico Inflation Numbers?
Since the Central Bank obtained its autonomy in 1994, Mexican authorities have placed much emphasis on improving the quality and reliability of, and confidence in, the CPI. The use of Quality Management Systems (QMS) allows for the evaluation and monitoring mechanism, which ensures that the CPI is developed through a quality and consistent methodology. Accordingly, the way to obtain the prices and build the index is consistent with best practices and global standards and is supported and recognized by international organization such as the International Monetary Fund (IMF) and the International Labor Organization (ILO).
Driven by best practices for the inclusion of better and more complete information, the INEGI announced in January 2011 a rebasing of the CPI from 2008 to 2010. The change involved an update to the basket of goods and services considered in the index and their corresponding weights in order to reflect households’ most recent expenditure patterns. In addition, the Institute introduced some methodological updates.
Why are Mexico Inflation data important?
The annual variation of the CPI is usually referred to as inflation and is the best instrument to measure generalized and sustained prices increases in the economy in a period of time. It is of particular importance for wage increases, social security benefits, pension allocations, interest payments, rents, as well as for private or public contracts. The correct track of inflation also allows financial and tax authorities to design monetary and fiscal policies better in order to ensure stability in the purchasing power, stability in the domestic currency, and to procure healthy public finances.
Where Can I Get forecasts for Mexico’s Inflation?
Forecasts for Mexico’s inflation are elaborated by many sources. The government, banks, consultancies and think tanks closely monitor inflation in Mexico and regularly update their estimates for the inflation rate. FocusEconomics collects more than 30 different forecasts on Mexico’s inflation and provides an average (Consensus Forecast) from the economists surveyed. Together with the minimum and the maximum projections for inflation in Mexico, you get a comprehensive overview on Mexico’s future inflation rates.
Forecasts for Mexico’s inflation are included in the monthly LatinFocus Consensus Forecast report for Mexico. All reports are available both on an ad-hoc basis and via an annual subscription (including optional Excel support). Download a free sample or purchase the report directly via our Online Store. The report is available immediately after purchase.
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