| | |  Business News 
Mexico Inflation Slows for Fourth Month as Supermarkets Compete on Prices
 Jonathan Levin & Jens Erik Gould - Bloomberg
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August 09, 2010
| | Mexico’s economic growth is slowing and competition is increasing at food and retail chains such as Wal-Mart de Mexico SAB and Grupo Comercial Chedraui SA, keeping a lid on prices. | |
Mexico’s consumer prices rose less than economists forecast in July and annual inflation slowed for the fourth straight month amid competition at supermarkets.
Consumer prices increased 0.22 percent in July from a month earlier and 3.64 percent from a year earlier as costs fell for eggs, melons and grapes, the central bank said on its website. The annual rate has fallen from 4.97 percent in March.
Mexico’s economic growth is slowing and competition is increasing at food and retail chains such as Wal-Mart de Mexico SAB and Grupo Comercial Chedraui SA, keeping a lid on prices, said Sergio Martin, chief economist for Mexico at HSBC Holding Plc.
“We’ve seen a price war developing in the supermarkets,” Martin said, speaking in a telephone interview from Mexico City. “Competition has increased a lot.”
Economists predicted monthly inflation of 0.24 percent and forecast an annual rate of 3.66 percent, according to the median estimates compiled by Bloomberg. Monthly core inflation was 0.2 percent in July.
Mexico’s peso rose 0.5 percent to 12.6316 per U.S. dollar at 11:45 a.m. New York time. The yield on Mexico’s 10 percent peso bond due in 2024 fell three basis points, or 0.03 percentage point, to 6.86 percent, according to Banco Santander SA.
Inflation Forecasts
Mexico’s central bank on July 28 kept its inflation forecasts unchanged through next year. Central bank Governor Agustin Carstens said police makers would wait for more economic data before making any changes to their predictions.
The bank expects annual inflation as high as 5.25 percent this year and as high as 3.25 percent next year. Policy makers target inflation at 3 percent.
Banco de Mexico kept its benchmark interest rate unchanged at 4.5 percent for the eleventh straight meeting last month.
The bank will raise borrowing costs in May 2011, according to the median estimate of analysts in a survey released Aug. 5 by Citigroup Inc.’s Banamex unit.
The bank cut the benchmark rate by 3.75 percentage points last year amid the global financial crisis.
Mexico’s economy grew 8.9 percent in May from a year earlier, as measured by the global economic indicator. Gross domestic product grew 4.3 percent in the first three months of the year from the same period a year earlier.
Latin America’s second-biggest economy is recovering from a 6.5 percent contraction last year, the biggest slump since 1932. The central bank forecasts growth of 4 percent to 5 percent this year.
To contact the reporters on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net; Jonathan J. Levin in Mexico City at Jlevin20(at)bloomberg.net
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