Prices dropped 0.03 percent from June, the national statistics agency said today on its website, compared with the median forecast for an increase of 0.02 percent from 18 economists in a Bloomberg survey. Annual inflation was 3.47 percent compared with 4.09 percent in June, falling into the central bank’s 2 percent to 4 percent target range for the first month since February.
“This shows that demand remains weak,” Marco Oviedo, chief Mexico economist at Barclays in Mexico City, said in a telephone interview. “There’s probably a lot of inventory and merchants haven’t been able to increase their prices.”
Banco de Mexico yesterday lowered its 2013 growth forecast to a range of 2 percent to 3 percent from a previous forecast of 3 percent to 4 percent while stressing it sees economic activity accelerating in the second half.
“Economic activity at a global level has been slowing,” central bank Governor Agustin Carstens said at the presentation of Banxico’s quarterly inflation report yesterday. “This has shown itself in a substantive drop in international trade” and “contagion from advanced economies to emerging ones,” he said.
Yields on fixed-rate peso bonds due in 2024 fell 5 basis points, or 0.05 percentage point to 5.80 percent at 10:21 a.m. in Mexico City. The peso strengthened 0.5 percent against the U.S. dollar to 12.6565.
Lower-than-expected core inflation reflects weak aggregate demand and “could be bad news for economic activity,” Barclays’s Oviedo said. The bank lowered its annual CPI estimate to 3.5 percent from 4 percent, according to a research note today.
Core prices, which exclude energy and farm costs, rose 0.03 percent in the month, compared with the median forecast of a 0.09 percent increase. Farm prices tumbled 1.51 percent, according to the statistics institute.
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