The Day at a Glance | August 9 2023

*Consumer inflation in Mexico set at 4.79% in July – in line with estimates. 

*In China, consumer inflation turned negative in July, with a -0.3% y/y reading. On the other hand, producer inflation continued to contract, as it logged an annual -4.4% figure. 

*In the US, figures from the Mortgage Bankers Association pointed to a -3.1% w/w decrease in the number of mortgage applications in the week ending on August 4th, marking three consecutive weeks of declines. 

Economic environment

The Consumer Price Index in Mexico recorded an annual 4.79%, the lowest figure since March 2021. On a monthly basis, inflation accelerated to 0.48% from June’s 0.10%, and it was higher than the average recorded from 2000 to 2022 for the month of July at 0.34% m/m, although it was marginally lower than the 0.49% forecasted by the analysts´ consensus. Core inflation logged a 0.39% m/m figure, also below the expected 0.42% and was attributed to a slight acceleration in goods (0.31% m/m) due to a higher variation in non-food goods (0.23%); while services advanced at a significantly faster rate (0.49% m/m) due to a 0.74% figure in the “other services” category; air transportation recorded a monthly 16.99% increase. On the other hand, after four consecutive months of negative readings, the non-core component increased by 0.77% m/m, driven by fruit and vegetable prices that recorded a strong monthly hike (5.5%), with double-digit growth in avocado and onion prices. This was partially offset by a -0.97% m/m decline in livestock prices; however, the agriculture and livestock category increased by 1.9% m/m. Lastly, energy prices continue to contribute to declining figures as they logged a monthly -0.42% decrease, which led to a -0.23% figure in the energy and government tariffs category. With this, on an annual basis, core inflation stood at 6.64%, and showed relatively little progress from June’s 6.89% y/y figure, while non-core inflation recorded a larger contraction in July (-0.67% y/y). July´s inflationary figures continue to show progress; however, risks mentioned in previous reports remain in place: services remain stagnant above 5%, and fruit and vegetable prices might also begin to exert upward pressure on inflation, as energy prices function as an escape valve.