Thursday, April 24, 2025

Inflation slowed in August for the first time in 6 months

Inflation in Mexico declined for the first time in six months in August, falling to an annual headline rate of just below 5% as fruit and vegetable prices eased.

The national statistics agency INEGI reported Monday that consumer prices were 4.99% higher in August than in the same month last year.

The National Consumer Price Index ticked up 0.01% on a month-over-month basis.

The decline in annual inflation came after the headline rate hit a 14-month high of 5.57% in July.

The 4.99% rate in August — just above the 4.98% reading in June — was lower than the 5.06% median forecast of banks, brokerages and research organizations surveyed by Citibanamex.

Mexico’s annual core inflation rate also declined in August, falling for a 19th consecutive month to reach 4.00%.

The sustained decline in core inflation was a major factor in the Bank of Mexico’s decision to cut its benchmark interest rate by 25 basis points to 10.75% in early August, even though the headline rate was well above the central bank’s 3% target.

The Bank of Mexico board will hold its next monetary policy meeting on Sept. 26.

Inflation for fresh produce almost halved in 1 month  

Prices for fruit and vegetables increased 12.61% annually in August. While inflation for fresh produce remained high, the rate declined significantly last month from a 23.55% reading in July.

Andrés Abadía, chief Latin America economist at Pantheon Macroeconomics, said that the impact of adverse climatic conditions on consumer prices, primarily drought, is gradually easing.

Prices for fruit and vegetables increased 12.61% annually in August, down significantly from a 23.55% reading in July.
Prices for fruit and vegetables increased 12.61% annually in August, down significantly from a 23.55% reading in July. (Galo Cañas/Cuartoscuro)

Annual inflation for the broader agricultural products category — which includes fruit and vegetables, and meat — was 9.45% in August, down from 13.72% in July. Inflation for meat ticked up to 6.12% from 5.36% in July.

INEGI data also showed that annual inflation for services was 5.18% in August, while energy prices, including those for electricity and gasoline, increased 6.58% compared to the same month last year.

Processed food, beverages and tobacco were 4.13% more expensive than a year earlier while prices for non-food goods rose 1.71% on an annual basis.

Inflation outlook in the second semester

Abadía predicts that the annual headline rate in Mexico will continue declining to reach 4.4% in December, while core inflation will end the year at 3.9%.

“Lower private demand, the improvement in supply conditions and delayed effects of stricter financial conditions will support this trend,” he said.

“However, upside risks persist, derived from volatile external conditions and internal political uncertainty,” Abadía said.

One uncertainty is the outcome of the Senate vote on the government’s controversial judicial reform proposal. A vote is expected this Wednesday.

September is the final month of President Andrés Manuel López Obrador’s six-year term in office. Claudia Sheinbaum will be sworn in as Mexico’s first female president on Oct. 1.

Inflation approached 9% in the second half of 2022, reaching its highest level in more than two decades. The headline rate declined for nine consecutive months last year, but the trend since late 2023 has been mostly upward.

With reports from El Financiero

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