- Mexico: Headline inflation in September H1 came in below expectations as fruits and vegetables cooled
In the first fortnight of September, headline inflation dropped for the fourth consecutive time, to 4.66% y/y from 4.83% (vs. 4.71% consensus). Core inflation moderated more than expected to 3.95% from 4.01% (vs. 4.95% consensus), floating around 4.0% since June, with some prints above this level and others below (chart 1). This sticky behaviour is expected to continue for the rest of the year.
Within core inflation, merchandise cooled to 2.94% y/y (2.97% previously), registering its second fortnight below 3.0%. Services moderated to 5.15% (5.26% previously), maintaining some stickiness since they have been above 5.0% since July 2022 (chart 2). On the other hand, non-core inflation continues to decline at 6.73% (7.27% previously), after reaching its highest point in the first fortnight of July 2024 at 10.64%. Within non-core inflation, agricultural products decelerated to 6.50% (7.97% previously) as fruits and vegetables dropped, with an important deceleration to 6.50% from its highest point of 14.33% in the first fortnight of July, while energy and government tariffs rose to 6.67% (6.42%), although below its highest level of 7.33% in the second fortnight of July (chart 3). In its sequential biweekly comparison, headline inflation increased just 0.09% 2w/2w (-0.06% previously, 0.14% consensus), the core component 0.21% 2w/2w (0.10% previously, 0.14% consensus), the core component 0.21% (0.10% previously, 0.10% consensus) and the non-core component presented a significant drop of -0.31% (-0.60% previously), summing three consecutive fortnights of declines.
In the coming policy meeting, Banxico’s Governing Board could highlight these better-than-expected data and deliver a dovish guidance, as inflation in agriculture has been seen considerably down (specifically fruits and vegetables), while merchandise and services are slowly declining. We believe these results increase the chances of a 50bps cut, although the consensus and our baseline scenario remains a 25bps cut.
—Brian Pérez & Miguel Saldaña
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.