Mexico’s inflation rate surged to 5.57% in July 2024, marking the highest level since May 2023 and surpassing previous market forecasts.
This significant rise, up from 4.98% in June, underscores the growing economic pressure in the country.
The increase is largely attributed to sharp price hikes in essential sectors such as food, housing, education, and services.
Key drivers of inflation
The Instituto Nacional de Estadística y Geografía (INEGI) reports that the escalating cost of food and non-alcoholic beverages has been a major driver of Mexico’s inflationary trend.
Prices in this category surged from 6.54% in June to 7.77% in July.
Notably, the cost of fruits and vegetables rose dramatically to 23.55%, up from 19.73% the previous month, significantly impacting consumer spending.
Additionally, sectors such as restaurants and hotels, education, miscellaneous products and services, and housing and utilities contributed to the overall inflation.
While the inflation rate for restaurants and hotels saw a slight decline from 6.43% to 6.42%, education costs increased by 6.37%.
Conversely, the inflation for miscellaneous goods and services fell from 5.79% to 5.54%.
The housing and utilities sector experienced a notable increase from 4.52% in June to 5.72% in July, reflecting broader economic challenges for consumers.
Core inflation and monthly variations
Despite the sharp rise in headline inflation, core inflation—a measure excluding volatile food and energy prices—slightly decreased for the 18th consecutive month, reaching 4.05% in July.
This is the lowest core inflation rate since February 2021 and aligns with market expectations.
The Consumer Price Index (CPI) saw a notable monthly increase of 1.05% in July, the highest in nearly three years and exceeding the expected 1.02%.
Core CPI also rose by 0.32% monthly, slightly above the anticipated 0.29%, indicating complex inflationary dynamics in Mexico.
Comparative analysis of inflation rates
In June, Mexico’s annual inflation rate rose to 4.98%, up from 4.69% in May, driven by a post-election drop in the peso amid political instability.
This increase was attributed to rising costs across various CPI categories, including food and non-alcoholic beverages, restaurants and hotels, education, and housing and utilities.
The July inflation rate of 5.57% continues this upward trend, driven primarily by increases in food and non-alcoholic beverages, especially for fruits and vegetables.
Other significant contributors include restaurants and hotels, education, and housing and utilities.
Interestingly, while the core inflation rate fell to 4.13% in June, it further declined to 4.05% in July.
This continuing decrease reflects a degree of stability within core inflation indicators, despite external economic pressures.
Monthly data shows a stark contrast between June and July. The CPI grew by 0.38% in June but spiked to 1.05% in July, marking the largest increase in almost three years.
Core CPI also increased from 0.22% in June to 0.32% in July, slightly surpassing market expectations and highlighting varying inflationary pressures.
The recent sharp rise in inflation underscores significant economic challenges, particularly in essential sectors.
Policymakers and analysts will need to closely monitor these trends to navigate the complexities of Mexico’s inflationary pressures and their broader implications for the economy.
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