Mexico Prices Rose More Than Expected Last Month
Mexico’s consumer prices rose more than economists expected last month, led by higher prices for air travel and perishable foods, as annual inflation ended the year above the bank’s target range.
Consumer prices rose 0.5 percent in December from a month earlier, the central bank said, beating the median estimate for a 0.39 percent rise in a Bloomberg survey of 15 analysts. Prices rose 4.4 percent from a year earlier, the fastest annual pace since March. Core prices rose 0.47 percent in the month, beating the median forecast for 0.43 percent increase.
Lemons led price increases among fruits and vegetables after heavy rains curbed harvests, said Alfredo Coutino, an economist at Moody’s Economy.com Inc. in West Chester, Pennsylvania. Air travel costs jumped as holiday demand combined with the grounding of Grupo Mexicana de Aviacion SA, the Mexican airline in bankruptcy proceedings, he said.
“We had a few supply shocks during the year, basically because of unfavorable weather conditions,” Coutino said. “There is no reason for the central bank to start tightening monetary conditions this year.”
The peso fell 0.2 percent to 12.2393 per U.S. dollar at 11:44 a.m. New York time. The yield on Mexico’s 10 percent bond due in 2024 fell four basis points, or 0.04 percentage point, to 7.31 percent, according to Banco Santander SA.
The bank has an inflation target range of 2 percent to 4 percent.
Tortilla Prices
Tortilla prices rose 2 percent in December, the fastest pace since January 2007, which may lead the government to intervene if costs for the Mexican staple food continue to advance, according to an e-mailed note from Luis Arcentales, an economist at Morgan Stanley.
Banco de Mexico predicts annual inflation will be 3.75 percent to 4.25 percent in the first quarter of 2011 and 3 percent to 4 percent in the second quarter. Inflation will be 2 percent to 4 percent from the third quarter on, the bank says.
The bank said in a Nov. 26 statement that it expected inflation to slow in 2011 after quickening at year-end. Core inflation was slowing as the currency appreciated, the economy grew below its potential and global inflation remained weak, the statement said.
The government announced last month that the minimum wage would rise 4.1 percent this year, a greater increase that the expected inflation rate at the end of 2011. Inflation will be 3.8 percent at the end of this year, according to a central bank survey of economists released Dec. 17.
The bank extended its longest-ever interest rate pause in November, maintaining the benchmark rate at 4.5 percent for a 15th straight meeting. The bank’s next monetary policy meeting is Jan. 21.
Economic Growth
Policy makers said in the statement accompanying their last decision that industrial output and manufacturing exports continued to grow and the economy had expanded continuously for more than a year, even as domestic investment was weak.
The bank will raise rates in January 2012, according to a Jan. 5 survey of economists by Citigroup Inc.’s Banamex unit.
Mexico’s economy is rebounding from a 6.1 percent contraction in 2009 on the back of export growth. Gross domestic product expanded 5.3 percent in the third quarter from a year earlier.
JPMorgan Chase & Co. on Dec. 29 raised its forecast for Mexico’s economic growth in 2011 to 4.5 percent from 3.5 percent, citing an increase in its forecast for U.S. growth after income tax cuts were extended. The U.S. buys about 80 percent of Mexico’s exports.
The government forecasts 3.9 percent growth this year. Finance Minister Ernesto Cordero on Jan. 4 said officials will probably raise that forecast as U.S. industrial production and domestic demand improve.
To contact the reporter on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
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