- Mexico: Inflation eases more than expected, though core pressures remain; Mixed signals in August retail and wholesale sales
MEXICO: INFLATION EASES MORE THAN EXPECTED, THOUGH CORE PRESSURES REMAIN
In the first half of October, headline inflation surprised to the downside, easing from 3.78% to 3.63% year-over-year, below the consensus estimate of 3.73% (charts 1 and 2). Core inflation also decelerated, falling to 4.24% from 4.30% previously (4.28% consensus). Within the core component, goods inflation stood at 4.06%, down from 4.19%, marking its highest level of the year, while services rose slightly to 4.42%, driven by higher prices in categories other than housing and education. Non-core inflation also moderated, dropping from 2.03% to 1.58%, mainly due to a sharper decline in fruit and vegetable prices (-8.38%). However, energy and government-regulated prices increased to 1.99% from 1.60%.
On a sequential biweekly basis, headline inflation rose 0.28%, up from 0.02% previously and above the expected 0.36%. Core inflation registered a 0.18% increase (0.09% previously, 0.20% expected). From a monetary policy perspective, there is broad consensus around an additional rate cut at Banxico’s November meeting, with expectations for a year-end rate of 7.00%. This outlook is mainly supported by the dovish tone communicated by most members of the Governing Board, despite an inflation risk balance tilted to the upside in the coming months.
MIXED SIGNALS IN AUGUST RETAIL AND WHOLESALE SALES
In August, retail sales posted a monthly increase of 0.6% in seasonally adjusted terms (chart 3). Employment and wages also showed gains, rising by 0.1% and 0.7%, respectively. In wholesale trade, the results were similarly positive: revenues grew by 1.2%, employment by 0.2%, and average wages by 1.7%. On an annual basis, retail revenues maintained the same growth rate as the previous month, at 2.4%. Employment improved, rising 0.7% (compared to -0.2% previously), while wages increased by 4.5%, though below the 7.0% recorded in July. In wholesale trade, employment and wages were revised upward, with increases of 0.7% and 0.2%, respectively, while revenues declined by 5.7%.
—Rodolfo Mitchell, Miguel Saldaña & Martha Cordova
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