La Jornada: Inflation spins downward for 4 fortnights; stands at 4.11% annually: Inegi

Inflation moderated in the first half of May, and stood at 4.11 percent at an annual rate. This is the fourth consecutive period in which a decrease in this indicator has been recorded, the National Institute of Statistics and Geography (Inegi) reported yesterday.

The national consumer price index (INPC) showed a slowdown in its advance due to the decrease in electricity prices, as well as some agricultural products. However, tomatoes and liquefied petroleum gas (LP) continued to increase, although at a slower rate.

According to Inegi data, it is the fourth fortnight in which inflation has seen a reduction, after reaching its highest point in the first half of March, at 4.63 percent at an annual rate. In addition, the biweekly data was below analysts’ expectations.

Despite this improvement, it was six periods above the target range of the Bank of Mexico (BdeM), which is 3 percent with an interval of one percentage point up or down.

The previous occasion in which it was below four percentage points was in the second half of February. The INPC registered a biweekly variation of 0.16 percent in the first half of May, slightly lower than the consensus, which was 0.14 percent. The fluctuation was above the average of the recent 15 years, 0.27 percent, for a similar period.

The underlying price index, which determines the trajectory of general inflation in the medium and long terms, grew 0.13 percent at a biweekly rate, given the increase of 0.09 percent in merchandise and 0.17 percent in services.

The non-core price index, which includes goods and services whose prices are more volatile, fell 1.14 percent, derived from the 0.53 percent decline in the price of energy and 1.64 percent in the rates authorized by the government. The Inegi indicated that this derived from adjustments in electricity rates for the warm season in 11 cities in the country. He specified that electricity prices fell 17.88 percent, green tomatoes 18.59 and serrano peppers 14.28. Meanwhile, the price of tomato advanced 5.59 percent, detergents increased 2.68 percentage points and LP gas, only 1.81 percent.

Banamex analysts pointed out that annual inflation picked up at the beginning of the year due to tax increases on food and agricultural prices. However, they estimate a slight downward trend, offset by tariffs and mitigated by exchange rate appreciation and economic growth.

Monex maintained that the moderation is mainly explained by non-core inflation, which reflected lower supply shocks in the agricultural sector. He noted that “inflationary pressures of a more persistent nature continue to be relevant.”