First, the good news which immediately prompted President Enrique Peña Nieto to go announce on a television ad that the economy is back on a roll: the gross domestic product (GDP) grew by 2.8 percent during the first quarter of 2017.
The bad news came Wednesday when the National Statistics and Geography Institute (Inegi) announced that during the first two weeks of May inflation shot up to 6.17 percent from the previous measuring in April which had been 5.82 percent.
With the bad news, the red lights at Mexico’s Central Bank (Banxico) are blaring again as just two weeks ago it hiked its interest rate to 6.75 percent as the increase was aimed at toning down the National Consumer Price Index (INPC) with opposite results. Incidentally, the President is notoriously silent on this issue.
This consecutive (figures are released every two weeks or quincena) two quincenas above the six point mark – double the Banxico forecast which is 3.1 percent – forcing the highest inflation level experienced by the Mexican economy since the dreary year of 2009 when the GDP went under to minus 6.1 percent.
Inegi figures show that the highest climb has been in fuel prices sparked by the liberation of prices by the government since last April but on which the Administration has put a lid on to preserve fluctuations to no more and no less than three centavos either up or down.
Still, energy prices and unauthorized rates went up be 13.50 percent during the first May quincena with the hike in public transportation ticket prices on federal roads considered the main culprit for the inflation rate upwards trend, which is bound to continue.
In a breakdown by areas, the INPC as gauged by Inegi places the blame on transport, 14.44 percent, alcoholic beverages and tobacco, 7.06 percent, hotels and restaurants, 5.83 percent, goods and services including personal care, watches, bags, auto insurance, funeral services among others with a general increase of 5.57. Furniture and home appliances increased by 5.52, all of them gauged in an annual basis.
Yet even if the President has not shown up to discuss inflation, the National Social Development Policy Evaluation Council (Coneval) did come up with a report written in total doublespeak – just when we thought 1984 was long gone – with such statements as:
“Regardless of the important increase in the prices of a diversity of products, the cost of the staple food basket grew less than inflation during the first three months of 2017.” It gives no figures and if we’re to believe Coneval’s evaluation current economic status, we’re better than Alice in Wonderland.
“Unemployment rate went down from 4 to 3.4 percent in the first quarter of 2017 just as it did in 2016.”
“Another element that has contributed to maintain purchasing power during the first quarter of 2017 was the minimum wage increase of 9.58 percent which was officially carried out in January.” Coneval, however, does not say that the wage increase amounted to seven pesos, less than half of the cost of a kilo of tortillas.
With inflation beginning to pick up increasing speed, the immediate future is foreseeable that no matter how much the growth forecasts are positively touted – and growth is positive, please don’t read me wrong, surely all of the efforts Banxico director Agustin Carstens is making will be nullified.
Definitely there is an array of financial “experts” who claim that the Mexican economy is buoyant and the middle class complain because they don’t do better for themselves and take the blame off the President Peña Nieto Administration.
This would be true except for the fact that it was President Peña Nieto, on a personal basis, which pushed the “liberation” of fuel and energy prices thus creating a reverberation in the entire logistics supply chain.
Will the Mexican GDP grow this year above the slated 1.5 percent foreseen by Banxico? Perhaps, but whatever good that will do it will mean nothing if inflation is not abated now!