Inflation reaches its highest level in five months: Inegi

Business

By CAPosts 08 August, 2020 - 09:01am 40 views

In July, overall inflation was 3.62 per cent per annum and in the monthly measurement it was 0.66, the largest variation for that month since 1999.

It was the lowest since February, when it stood at 3.70 percent a year.

Erratic behavior continues to be observed in some components of inflation, with short-term upward pressures, which relates to the effects of the Covid-19 pandemic, Citibanamex's Directorate of Economic Studies said on Friday.

July was the case for commodity prices, which recorded their largest monthly increase for a seventh month since 1996, as well as energy prices, which saw their highest growth for a similar period since records were recorded.

By contrast, the prices of the services showed their lowest increase by July since the series began, in 1982. Powerful recessionary forces are expected to result in a slowdown in inflation, he added.

Non-core inflation, i.e. the one that encompasses goods and services whose prices are most volatile, was 1.48 per cent per month, while in its annual variation it was 2.92.

This was explained by the increase in energy prices, which was 3.9 per cent compared to the previous month, although at an annull rate it decreased by 0.41.

Meanwhile, the cost of livestock food grew 1.15 percent in its monthly variation and 1.73 percent compared to the same month last year.

The underlying inflation was 0.40 percent compared to the previous month, while compared to the same period in 2019 it was 3.85. 

Items with the highest raises

Prices for the products with the largest increase in the seventh month of the year were low-octane petrol (5.64 per cent), chicken (5.60), high-octane petrol (5.26) and potato (6.61).

By contrast, the number of declines were serrano chili (29.20 percent), grapes (29.25) and chayote (24.07).

Monex specialists indicated that, with the Results of July, inflation continues to move away from the path posed by the Bank of Mexico (BdeM) in its most recent quarterly report, which estimates that the progress of the national consumer price index will be 3.5 percent by the end of the year.

"While such a scenario is still feasible, its achievement will depend on the fact that the distortions caused by Covid-19 are soon dissipated and that non-core inflation remains stable in the remaining months of 2020.

We believe that over the next two months inflation will approach levels of 3.9 per cent, which will have relevant implications for the tone of monetary policy, the experts said.

The contraction in economic activity and demand (due to falling consumption) offset some of the upward effect on inflation that currency depreciation, disruption of supply of goods and services and others would have," the Go for More analysis area said.

Given the uncertainty about the performance of inflation, the economy and conditions, when considering the current and expected level of external interest rates, the BdeM is expected to announce next week – at its monetary policy meeting – a final reduction in the benchmark interest rate, in this case half a percentage point, to 4.50 percent, he added.

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