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JPMorgan on Upcoming Mexico Inflation Data

MEXICO
  • The preliminary May CPI print, due tomorrow, is unlikely to reflect the recently enacted plan to fight off high-inflation-yielding results. The headline CPI should edge down 0.01% 2w/2w, but entirely due to seasonal electricity tariff cuts; in fact, the over-year-ago inflation rate would remain unchanged at 7.64%. There are tentative signs that some agricultural products prices are easing, but these should be taken with caution.
  • JPM’s main interest remains in core prices, and here the picture is unchanged and concerning.
  • JPM’s 1H May core CPI forecast (0.33% 2w/2w) translates, according to their models, into a 0.65% m/m, sa early estimate for the full month. This would be right in line with the past several months, and still about double the historical norm.
  • Goods prices remain under significant strain, compensating for a likely slowdown in service-sector prices in the month. Moreover, service-sector prices are usually distorted around this time of year, particularly ex. housing and education, as the shifting timing of Easter leads to swings in tourism prices.
  • Averaging April and May yields somewhere around a 0.6% m/m, sa increase in services ex. housing and education in May, similar to earlier months.
  • With inflation expectations rising, as suggested by analyst surveys and rising nominal wage growth, the risk of persistent, inertial inflation remains high.
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