August 9, 2022

Mexico Also Suffering from Inflation

Just like the USA, Mexico is being hit with high pumpiing

Along with the United States’ figures, we also now have  Mexico’s estimated Customer Price Index  pumpiing growth rate.

For 06 2022, Mexico experienced seven. 99 percent price inflation year over year. This is the biggest number Mexico offers seen since the volatile 1990s and the 2001 recession.

This also marks the twenty-fifth straight month along with CPI inflation above the particular Banco de Mé xico’s  3 percent inflation target . Indeed, Philippine inflation hasn’t been below 3 percent since May 2020 (and then only barely, at 2 . 84 percent). Mexico’s CPI has been regarding double or greater than dual the target rate since Apr 2021.

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Source: Firm for Economic Co-operation plus Development  Main Financial Indicators database   (Consumer Price Index: Most Items for Mexico, OECD descriptor ID no . MEXCPIALLMINMEI), via  FRED , accessed July 18, 2022.

During this period, unsurprisingly, wages in Mexico have not kept up with the approximated inflation.   Manufacturing wages   illustrate this. Though the FRED data source has not updated Mexican wage numbers since April, you observe a steady decline in true manufacturing wages in Mexico from January 2021 in order to April 2022. In Apr 2022, Mexico saw an estimated 6. 08 percent pumpiing rate and a 0. sixty-five percent  decline  in manufacturing wages. Not including the seeming outlier weeks of March and May 2021, Mexican manufacturing wages have not kept pace with inflation in the slightest. It doesn’t take a skyrocket scientist to notice that this is just not a promising trend for the average Mexican, and it is certainly reason behind lower- and middle-class people to be concerned. Like the United States, Mexico’s unemployment rate has been  below 4 percent all year , yet what good is employment if each month is met with falling real income? A falling real wage is a falling standard associated with living— it’s growing impoverishment.

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Source: Organization designed for Economic Co-operation and Development  Main Economic Indications database   (Hourly Earnings: Manufacturing for South america, OECD descriptor ID number LCEAMN01MXM661S), via  WENDY , accessed July eighteen, 2022.

There will be only one silver lining, though it is only one of comparison. Despite Mexico’s not being known for its sound monetary policy, its pumpiing rate all year continues to be below that of one important country— the United States. Yes, the year 2021 has seen increased inflation rates in the United States of America than in the Usa Mexican States. Now, just like be seen in the chart below, Mexico’s trend has more or even less mirrored that of the united states. But it seems somewhat significant that the country that noticed double-digit year-over-year inflation since recently as 2000 is definitely behind the United States in that precise category this year, and at an increasing rate. Another win pertaining to American exceptionalism!

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Source: Organization for Economic Co-operation and Development  Major Economic Indicators database   (Consumer Price Index: All Items for Mexico, OECD descriptor ID number MEXCPIALLMINMEI), via  FRED , accessed July eighteen, 2022; and US Bureau of Labor Statistics (Consumer Price Index for All Metropolitan Consumers: All Items in U. S. City Typical [CPIAUCSL]), via  FRED , seen July 18, 2022.

There might be another silver lining, at least in process. Unlike the United States, Mexico continues to be much  more proactive in raising interest rates . This year alone, rates possess gone from 5. 50 to 7. 75 percent. That being said, the CPI and the interest rate simply appear to be reflecting each other. Increases in the interest rate do not seem to be lowering pumpiing, but at least Mexico continues to be more ambitious than the United States, whose leaders at the Given do not even seem to be aiming to stop inflation.

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Source: “ Mexico Central Bank key rates , ” countryeconomy. com, seen July 18, 2022.

As with its helpful neighbor to the north, Mexico’s price inflation is not transitory.   M2 offers steadily increased   over the years, including a obvious covid-era jump. As regrettable as this situation may be, it was far from unpredicted. Readers of this site understand the relationship between monetary inflation and price inflation, so I imagine this really is of little surprise to them.

Yet numerous in charge in both countries are perplexed— or at least are posturing as being perplexed. It will be interesting to see what becomes of the inflation problem in the arriving months, in Mexico and the United States, as well as in the world sobre bloc. Mexico is not as hesitant, it appears, to raise rates of interest as the United States, but as seen, raising rates has not really reigned in pumpiing so far. Given how interconnected Mexico and the United States are, a crisis in the United States will nearly surely cause a crisis in Mexico, too, regardless of how Mexico handles its own price inflation. But at least all this reckless monetary policy resulted in less covid cases!   Oh  wait   …

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