Mexico to Boost Food Price Weighting Impact on Inflation in 2016

  • Weightings for health spending, communications also will rise
  • Changes to take effect in second half of 2016, official says

Mexico will increase the weighting of food and non-alcoholic drinks in its inflation basket to almost a quarter of the consumer spending index next year in an effort to improve cost of living reports, according to an official from the national statistics institute.

The weightings for health spending, communications, car maintenance and bottled water also will rise, while education and electricity will fall, said Arturo Blancas, the head of economic statistics for the institute known as Inegi.

Mexico is working to improve how it measures spending and incorporates rural consumption into its index, with changes that include increasing the number of products surveyed and adding new cities, Blancas said. The base year change will be implemented in the second half of next year, he said, adding that he didn’t know if the changes overall would lead to a higher or lower annual inflation rate.

"We’re updating the index, making the measurements more precise," Blancas said in an interview Tuesday in Guadalajara. "It’s not that our inflation measurements were bad before, but things can always be improved."

Mexico is working to regularize the frequency of the updates to its inflation basket based on International Monetary Fund recommendations and plans to adjust the weightings every five years, Blancas said. The changes come at a time when the nation’s annual inflation rate has fallen to the lowest in almost a half century on weak growth, falling costs for phone services and lower gasoline-price increases.

Mexico consumer prices rose at a 2.52 percent annual rate in September, the lowest since 1968, when The Beatles topped the charts with the song “Hey Jude.” Inflation’s drop to below the central bank’s 3 percent goal has allowed the board, led by Governor Agustin Carstens, to leave its key interest rate at a record low 3 percent since June 2014 to boost Latin America’s second-biggest economy.

Food and non-alcoholic beverages will rise to about 23.5 percent of the inflation index, up from 18.72 percent today, Blancas said. Health will increase to about 3.01 percent from 2.18 and communications to 4.12 percent from 3.99 percent, reflecting the growing use of mobile devices. The weighting for education will fall to about 3.72 percent from 5.11 percent as lower costs for rural school spending are reflected, he said.

Mexico will survey for prices in about 55 cities, up from the current 46, and the number of products surveyed will rise to about 305 from 283, Blancas said.

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