Rising Food Prices Impact Purchasing Power in New Year

The increase in prices for processed products and basic basket foods will contribute to the "January slope," a price increase phenomenon related to inflation seen in the first weeks of the year, impacting the economy of Mexican families. This situation is expected to extend until March, driven by annual taxes and external factors, such as Donald Trump assuming the presidency of the United States in 2025.

General inflation stood at 4.44% annually at the beginning of December 2024, marking its third consecutive fortnight of deceleration. During this period, fruits and vegetables increased by 11.23% annually, while livestock products rose by 5.79%. However, Alejandro Saldaña, Chief Economist, Ve por Más (BX+), noted that the price surge in agricultural goods observed in October has eased, contributing to the overall slowdown in inflation.

Specialists point out that, unlike previous years, this January slope will be mainly driven by the rise in processed food prices. Ignacio Martínez, Coordinator, Laboratory for Trade, Economy, and Business Analysis (Lacen), highlighted that companies like Bimbo, Bachoco, and Lala are largely responsible for the rising food costs.

Martínez emphasized that despite benefiting from the Inflation and Scarcity Mitigation Package (PACIC), a government program designed to eliminate tariffs on basic basket products, these companies continue to inflate consumer prices.

Grupo Bimbo announced that some of its products, mostly sweet bread varieties, increased by MX$1 starting Dec. 23, 2024. The bakery clarified that this adjustment, the first in 16 months, is below inflation and complies with PACIC guidelines. Additionally, the company assured that the prices of white and whole-grain bread would remain unchanged.

Beyond processed food price hikes, a 4.5% adjustment to the Special Tax on Production and Services (IEPS) took effect in early 2025, impacting the costs of cigarettes, soft drinks, and gasoline. These adjustments will particularly affect small businesses, said Gerardo Cleto López, President, Council for Small Business Development (ConComercioPequeño SC).

López explained that small shopkeepers have no choice but to set prices as suggested by suppliers, putting them at a disadvantage compared to supermarket chains that offer discounts or other sales strategies. "A consumer in Mexico City's metropolitan area who paid MX$135 (US$6.6) for a 600ml soda, a pack of cookies, a pack of cigarettes, and a lighter, will now pay over MX$150, representing an increase of more than 11%," he noted.

Rising fuel costs are another factor that could lead to a general price increase across the food industry, which relies on vehicles for transportation, emphasized Fernando Acosta, President, Food Industry Chamber of Jalisco (CIAJ), in an interview with El Economista. 

Furthermore, since late 2024, basic basket products have seen price hikes. Alberto Vargas, President, National Movement for Social Commerce (MONACOSO), reported that prices for foods such as meat, dairy, and vegetables began to rise in mid-December. He cited increases in the price of eggs from MX$44 to MX$50 /kg, chicken breast exceeding MX$120/kg, and pork (leg or ribs) at MX$130/kg.

Jesús Adán Castillo, Delegate, Veracruz State Economists College, stated that the January slope could extend until March, forecasting a challenging first quarter for Mexican families' economies. Moreover, the inauguration of US President Donald Trump is also expected to negatively impact Mexico's economy.

In November 2024, Donald Trump announced that upon taking office, he would impose a 25% tariff on all goods entering the United States from Canada and Mexico, as reported by MBN. Experts warned that these tariffs could lead to inflationary pressures across all three countries, with the United States particularly vulnerable. The nation could face an agricultural trade deficit exceeding US$42 billion by 2025, due to its reliance on food imports, especially fresh produce from Mexico.