From October 2018 to October 2023, an accumulated inflation of 28.75% is recorded in Mexico. The price level reached maximums during 2022 but has managed to establish itself so far in 2023. Currently, the interannual inflation rate is 4.26 percent.
During 2022, the world experienced one of the most important inflationary waves in recent decades. The general rise in prices put pressure on the pockets of families and drove the indices to high levels.
In Mexico, in the five most recent years – from October 2018 to October 2023 – an accumulated inflation of 28.75% was recorded, according to figures from Inegi (National Institute of Statistics and Geography).
It is observed that the National Consumer Price Index reached a level of 130.61 points, which reflects an increase of around 30 points in these recent five years.
Although prices always tend to grow in economic cycles, during some periods they grow stronger and faster. Additionally, some products, such as agricultural and energy products, are more volatile and sensitive to market conditions.
Inflation accumulated over the years provides a general picture of price changes at the national level, but the key indicator for monetary policy is the year-on-year inflation rate.
The Bank of Mexico aims for this rate to be at levels of 3% +/- one percentage point.
If the monthly behavior of this rate is observed during the five-year period, it stands out that during 2020 and early 2021 – the period of economic crisis due to the pandemic – prices fell, reaching the established goal; But by the middle of 2021, a trend of historic increases in the level of inflation began.
In September 2022, an annual inflation rate of 8.70% was recorded, twice the goal established by the Bank of Mexico, and a level not seen in approximately two decades.
Basic basket, more sensitive
The minimum consumption basket includes products and services considered basic for households in Mexico. The index that evaluates the behavior of this basket is one of the most sensitive.
As of October 2023, it is observed that the inflation of this minimum basket was 3.83%, below general inflation.
It is observed that in the process of inflationary slowdown that is currently being experienced, this basket has fallen more strongly while during the inflationary wave of 2022 it registered even greater increases than the general index.
The price level of the minimum consumption basket is fundamental because this basket represents more than half of the total expenditure made by the poorest families in the country. The impact is unequal between households due to labor purchasing power and the composition of household spending.
Inequality gaps appeared more strongly during the inflationary wave of 2022.
In these recent five years, the price level by consumption stratum showed that in the group of households with lower income the inflation rates are higher. In the first month of 2023, the inflation rate in the stratum of one minimum wage or less, the inflation rate was 9.67%, while in the stratum of six minimum wages or more it was 7.41 percent.
The gap deepens if it is broken down if inflation is analyzed by object of expenditure. In January 2023, the inflation rate in food and beverages for the lowest stratum was almost 10 percentage points higher than in the highest stratum.
Mexico, in relation to the world
Although the inflationary wave of this period was global and represented a monetary policy challenge for almost all countries in the world, the dimensions and impact were not the same between countries.
In Mexico, accumulated inflation in five years is 28.75%, a modest level when compared to countries such as Argentina and Turkey, where accumulated inflation is close to 628% and 101% respectively.
On the opposite side, some Nordic and European countries recorded significantly lower inflation levels.
One of the factors that gave Mexico air was a very moderate increase in energy prices compared to other countries. The international conflicts of Russia-Ukraine and Israel-Palestine have caused gas, hydrocarbons and electricity to reach historic prices in Europe and other regions.
Source: El Economista
