Mexico Prices Advance More Than Forecast as Target Exceeded

Mexican consumer prices rose more than analysts expected in the first half of August, keeping the annual inflation rate above the upper limit of the central bank’s target range.

Prices increased 0.19 percent in the two weeks, the national statistics institute said on its website today, compared with the 0.16 percent median forecast of 20 economists surveyed by Bloomberg. While the annual inflation rate fell to 4.07 percent, it remains above the 2 percent to 4 percent target range.

The central bank left its benchmark interest rate unchanged last month at a record-low 3 percent, saying the economy showed signs of picking up without pressuring inflation. Yesterday, the statistics agency said that gross domestic product expanded more than forecast in the second quarter as a rebound in U.S. demand boosted exports, helping Latin America’s second-largest economy recover from six months of disappointing growth.

“Inflation was a bit stronger than expected,” Marco Oviedo, chief Mexico economist at Barclays Plc, said in a telephone interview from Mexico City. “It’s still in line with expectations that inflation is going to be very close to 4 percent through the third quarter.”

The peso was little changed at 13.1075 per U.S. dollar at 8:32 a.m. in Mexico City. The yield on inflation-linked bonds due in June 2016 decreased 0.03 percentage point to 0.02 percent, according to data compiled by Bloomberg.

Inflation Forecast

The central bank said this month that the pace of annual price increases may remain at about 4 percent during most of the second half of 2014 before nearing 3 percent in early 2015, when a change in the way the nation prices gasoline will help curb price increases.

Starting in January, increases in gasoline prices will be pegged to broader inflation rather than subject to regular increases by the government that have been running ahead of inflation in the rest of the economy.

Core prices, which exclude energy and farm costs, increased 0.15 percent in the first half of August, more than the 0.12 percent forecast by analysts. Core prices increased 3.34 percent from a year earlier, compared with a 6.5 percent jump in more volatile non-core prices.

Gross domestic product climbed 1 percent in the second quarter from the previous three months, faster than first-quarter growth that was revised up to 0.4 percent, the national statistics institute said yesterday. The median forecast of 14 economists surveyed by Bloomberg was for growth of 0.8 percent.

GDP grew 1.6 percent from a year earlier, down from 1.9 percent in the first quarter, as Easter fell in April this year instead of March.

The unemployment rate rose to 5.47 percent in July, the statistics agency reported today, surpassing the median estimate of 17 analysts polled by Bloomberg for a jobless rate of 4.97 percent.

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