Mexico: Inflation begins to trend downwards
February 25, 2011
In January, consumer prices rose 0.49% over the previous month, which was virtually unchanged over December's 0.50% price increase and in line with market analyst expectations. The reading reflected higher prices for food, beverages and tobacco in particular cigarettes (+17.58% month-on-month), and limes (+33.25% mom), which are an important part of the Mexican diet. As a result, annual inflation slowed to 3.8% (December: 4.4%). Meanwhile, the core inflation index, which excludes volatile categories such as food and energy, rose 0.46% over the previous month, pushing annual core inflation down to 3.3% (December: 3.6%). The reading was calculated using a new, but only marginally different, methodology, the most notable change being a new way to compute housing prices and a higher weight attached to the consumption basket of services compared to goods. Furthermore, more recent data suggest a downward trend in inflation despite rising agricultural prices. In the first half of February, consumer prices added only 0.21%, which was broadly in line with analysts' expectations. As a result, annual inflation fell further to 3.6%. Panellists and the Central Bank anticipate inflation to continue moderating in the months ahead.