Mexico's inflation rate climbs higher in the initial half of July 2024
In the first half of July 2024, Mexico experienced a surge in inflation, with the National Consumer Price Index (INPC) increasing by 0.71 percent compared to the previous fortnight, marking a significant rise. This upward trend was also reflected in the biweekly increase of merchandise prices by 0.02 percent.
The city of Merida Yucatan emerged as the region with the highest inflation in Mexico. Notably, the prices of certain products and services saw a significant spike. Tomato, onion, chayote, air transport, and avocado were the items that witnessed the most price hikes, with tomatoes increasing by 27.97 percent, onions by 16.72 percent, chayote by 13.41 percent, air transport by 12.03 percent, and avocados by 10.00 percent.
The inflationary pressures were not limited to these specific items. Inflation in Mexico, as reported by the National Institute of Statistics and Geography (Inegi), stood at 5.61 percent in the first half of July 2024. This upward trend can be attributed to several key factors.
Firstly, higher prices were observed in the food, beverages, and tobacco sectors, possibly due to domestic and global supply constraints. These sectors account for a significant portion of the CPI basket, with food and beverages alone accounting for about 14.8 percent and tobacco for 9.5 percent.
Secondly, energy price volatility contributed to cost increases, further fueling inflation.
Thirdly, trade deficits where rising import costs outpaced export growth impacted domestic prices. By mid-2024, Mexico experienced a swing to a trade deficit as imports grew faster than exports, particularly impacting sectors reliant on imports.
In addition to these factors, agricultural product price fluctuations, subject to weather conditions, also influenced inflation dynamics during this time frame.
Inflation peaked at around 4.66 percent in 2023, before moderating toward 4.21 percent by the end of 2024. However, core inflation, which excludes volatile goods, remained elevated, reflecting consistent price pressures in goods and services.
Looking ahead, Mexico's inflation rate rebounded to 3.24 percent in January 2025, the highest level in 6 months. In contrast, the inflation rate in the first half of December 2024 was 7.77 percent. Despite these fluctuations, inflation rates began to decline toward lower levels such as 3.51 percent by July 2025.
It's important to note that the rates authorized by the government also rose by 1.21 percent during this period. Additionally, the non-core price index rose to 2.32 percent at a biweekly rate and 10.64 percent at an annual rate. The underlying price index, meanwhile, rose 0.18 percent at a biweekly rate and 4.02 percent at an annual rate during the first half of July 2024.
In conclusion, the main inflation drivers from July 2023 to July 2024 were higher prices for food, beverages, and tobacco products, persistent core inflation reflecting price increases in goods and services, energy price volatility contributing to cost increases, trade deficits where rising import costs outpaced export growth, and agricultural product price fluctuations subject to weather conditions. These factors explain the upward inflation trend before improvements leading into 2025, when inflation rates began to decline toward lower levels.
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