Mexican consumer prices fell more than analysts expected in April as fruit, vegetable and mobile phone service costs dropped, pushing annual inflation to its lowest level in six months.
Get our news delivered to your inbox every morning. Click here to signup
Prices slid 0.19 percent from the previous month, the national statistics agency said, compared with the 0.13 percent drop forecast by 23 analysts in a Bloomberg survey. Annual inflation (MXCPYOY) slowed to 3.50 percent from 3.76 percent in March, within the 2 percent to 4 percent target range. Core prices, which exclude energy and farm costs, increased 0.29 percent, less than the 0.36 percent forecast by analysts.
Mexico’s inflation has slowed each month since reaching an eight-month high of 4.48 percent in January, when new taxes on everything from dog food to chewing gum took effect. Economists have been paring their forecasts for consumer price increases this year after the levies failed to trigger a surge in prices, with a central bank poll published yesterday showing the lowest estimate for 2014 annual inflation in six months.
“Inflation has behaved remarkably well after the increase in taxes in January,” Carlos Capistran, the chief Mexico economist at Bank of America Corp., said in an e-mailed response to questions. Today’s report “increases downside risks for our end-of-year forecast of 3.9 percent.”
The peso strengthened 0.2 percent to 12.9446 at 8:29 a.m. in Mexico City after appreciating 0.6 percent in the year through yesterday. The yield on inflation-linked bonds due in June 2016 fell one basis point to 1.03 percent.
Mexico on Jan. 1 implemented a new tax on sugary drinks of 1 peso per liter, an 8 percent duty on junk food and a 7.5 percent levy on mining profits, among other taxes.
Economists expect inflation to end the year at 3.85 percent, according to yesterday’s central bank poll, down from 3.92 percent in the previous survey. The analysts also lowered their growth outlook, to 3.01 percent from 3.4 percent at the start of the year.
Retail sales unexpectedly contracted in February, signaling Latin America’s second-biggest economy was struggling to recover in the first quarter.
Central bank Governor Agustin Carstens said April 4 he saw “encouraging” signs of an economic rebound after a slow start to the year. In March, remittances reached $2.06 billion, the highest level since June 2012, and in April the consumer confidence index rose more than economists expected to 90.3.
Mobiles and Limes
“Some components of aggregate demand have begun to have a favorable performance,” the central bank said in a statement explaining its interest rate decision on April 25.
Capistran of Bank of America said he expects stronger economic activity to push up core inflation. Mobile phone service rates fell due to a new telecommunications law meant to fuel competition in phone and TV sectors, he said.
Cellular phone service rates fell 2 percent from the previous month and lime prices tumbled 39 percent after soaring 41 percent in March and 68 percent in February, the national statistics institute said today. The cost of the fruit had also risen 45 percent in January.
Mexico’s consumer protection agency filed a complaint with the attorney general’s office last month against lime growers in Michoacan state for allegedly fixing prices and driving up inflation, Lorena Martinez, who heads the agency, said in an April 4 interview.