Itaú BBA - MEXICO – On an annual basis, March’s headline inflation accelerated somewhat pressured by energy pri

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MEXICO – On an annual basis, March’s headline inflation accelerated somewhat pressured by energy pri

April 9, 2019

Core inflation remained practically unchanged compared to last month

March’s CPI was pressured by energy prices. Inflation stood at 0.39% month-over-month in March (compared to the 5yr median of 0.32%), slightly above our forecast of 0.38% and marginally below market expectations of 0.40% (as per Bloomberg). March’s figure was pressured by an increase in energy prices (1.78% month-over-month in March, from 0.29% a year ago), associated to an increase in gasoline prices, while non-core food inflation decelerated to -0.67% (from 0.38% a year ago). In turn, on a monthly basis, core inflation remained practically unchanged compared to a year ago (0.34%, from 0.33%), with core inflation services decelerating (0.35%, from 0.40% a year ago), while core inflation tradables accelerating (0.34%, from 0.25% a year ago).

On an annual basis, headline inflation accelerated slightly, pressured by non-core energy inflation, while core inflation remained practically unchanged. Headline inflation accelerated slightly to 4.00% year-over-year in March (from 3.94% in February). Looking at the breakdown, core inflation remained practically unchanged at 3.55% (from 3.54% in February), with core services (3.38%, from 3.43%) decelerating, while core tradables (3.71%, from 3.61%) accelerating somewhat. A cleaner indicator for prices driven by domestic demand (core services excluding telecom, tourism related services, and airfares) accelerated somewhat to 3.75% year-over-year (from 3.64% in February). In turn, non-core inflation accelerated to 5.47% year-over-year in March (from 5.26% in February), with non-core energy inflation accelerating the most, to 8.15% (from 6.57%), while non-core food inflation decelerated to 3.70% (from 4.80%). Within energy prices, regular gasoline prices increased to 12.08% (from 10.64%), despite the Ministry of Finance increasing the stimulus to gasoline prices.

At the margin, core inflation slowed down at a faster pace than headline inflation. Using seasonally adjusted three-month annualized figures, headline inflation decelerated to 0.21% rate in March (from 0.37% in February), while core index decelerated at a faster pace (2.68%, from 3.02% in February).

We expect inflation to end 2019 at 3.6%. Although inflation accelerated slightly in March on an annual basis, actual average 1Q19 year-over-year headline CPI is in line with Banxico’s forecast path of 4.1%. However, the lingering uncertainties surrounding Mexico’s economy continue to constitute upside risks for inflation.


Julio Ruiz



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