Prices of Food Products Push Inflation Levels

According to INEGI, consumer prices rose 0.41 percent in early September, resulting in an annual rate increase of 8.76 percent. For this period, inflation was expected to yield and remain at 8.71 percent, as Reuters reported. Much of this inflation can be traced back to the cost of food, leading economists said. 

In recent months, the discussion about inflation has revolved around whether it has reached its peak or not. Although a small slowdown was recently reported, analysts said that this should be taken as a sign that the trend has begun to slow down. "Today’s data is bad news since we expect a similar development toward the end of the year. It is unlikely that we have reached the peak of the cycle as observed in the US and other advanced economies,” said Marcos Arias Novelo, Analyst, Monex.

Furthermore, Jessica Roldán, Chief Economist, Finamex, pointed out that although inflation could slow down its growth in October and November, it would rebound in December, closing the year at around 9.05 percent.

To face the issue, the López Obrador administration met with businessmen to reinforce the Package against Inflation and Famine (PACIC), presented this May. Nonetheless, according to analysts, the PACIC has had little impact on the level of inflation so far.

The main reason for its persistent growth is the increase in food prices, which directly affect households, especially those with lower incomes.

In the first half of September, core inflation stood at 8.27 percent as a result of increases in commodity prices of 10.75 percent, whereas food, beverages and tobacco climbed 13.27 percent. On the other hand, the annual increase for non-core inflation ascended 10.22 percent, with the agricultural sector under the biggest amount of stress, with a price hike of 15.23 percent against increases in livestock products as well as fruits and vegetables.

Recently, tomatoes, small restaurants and electricity costs are the factors that had the greatest impact on overall inflation. In the case of tomatoes, costs increased 5.57 percent in September compared to the second half of August, making it the commodity with the highest impact on the overall index. Meanwhile, small restaurants such as taquerias, fondas and loncherias presented a bi-weekly price increase of 0.62 percent.

Other products whose price increased compared to the last fortnight were corn tortilla with 1.03 percent, chicken with 1.07 percent, egg with 1.66 percent and onion with 4.38 percent. These products, along with tomatoes, are part of the basic basket of PACIC.