Inflation 1h – Nov: Buen Fin delivered limited price declines

In the first fortnight of November, inflation stood at 0.47% bw, driven by the withdrawal of the electricity tariff subsidy and higher public transportation prices. These pressures were partially offset by softer goods inflation associated with the Buen Fin discount program. As a result, annual inflation for the first fortnight of November reached 3.61%, maintaining room for an additional rate cut by Banco de México in December.  

Typically, inflation for this period averages 0.51% bw. Market consensus expected 0.41% bw, compared with our estimate of 0.44% bw.

This fortnight’s reading was higher than those observed in previous months due to the withdrawal of the summer electricity subsidy. This component contributed 28 basis points to headline inflation after posting a 20.70% bw increase.

In addition, public collective transport fares in Mexico City rose by nearly 18%, causing the collective transport component to increase 4.32% and adding 7 basis points to headline inflation. As a result, the non-core component recorded a 1.93% bw increase, above the historical 1.69% bw for this period.

However, part of these pressures was offset by discounts associated with the Buen Fin program, held from November 13 to 17. This year, fewer markdowns were recorded: around 70% of products within the non-food goods component showed price declines, compared with 80% last year. This may be related to the weakness observed in economic activity, which likely limited firms’ ability to offer more aggressive discounts.

Meanwhile, food goods inflation fell –0.18% bw, its largest decline for a fortnight in 37 years, and the first decrease during the Buen Fin season for this period. Within the category, the largest drops were concentrated in alcoholic beverages such as rum (–9.78% bw), table wine (–9.43% bw), and brandy (–8.84% bw).

With this, annual headline inflation increased from 3.50% to 3.61%; core inflation remained at 4.32%, and non-core inflation rose from 0.80% to 1.29%.

It is worth noting the dynamics within the core component, where services have now accumulated five consecutive fortnights of increases, reaching 4.50%, offset by softer pressures in goods.

In this context, inflation has now remained within Banco de México’s target range for nine consecutive fortnights, and we expect this dynamic to persist through year-end, closing at 3.80%. This maintains room for another policy rate cut in December, which would bring the reference rate to 7.00%.