Inflation Eases in the First Half of June on a Collapse in Fruit and Vegetable Prices, but Services Keep Pressuring

The drop in headline inflation was driven by farm products, while core inflation stayed above 4% due to higher service prices.

Inflation in Mexico caught a breather at the start of the year’s second half: in the first half of June, the National Consumer Price Index (INPC) cooled to 3.55% year over year, with a biweekly change of -0.11%, according to INEGI. The reading was explained mainly by a downward correction in farm product prices—especially fruits and vegetables—which offset noticeable increases in categories tied to services and tourism.

Compared with the same period a year earlier, the shift in tone is clear: back then, biweekly inflation was 0.10% and annual inflation was 4.51%. This time, the non-core component fell sharply, reflecting the typical volatility of fresh foods and how quickly they can move the headline number over short periods.

The decline was concentrated in farm products, which dropped 2.65% over the two-week period, including a 5.24% fall in fruits and vegetables. Items with the biggest downward impact included tomatoes (-23.98%), poblano peppers (-28.33%), and eggs (-4.51%), along with adjustments in serrano peppers, grapes, and bananas. This kind of behavior is usually associated with harvest cycles, weather conditions, supply logistics, and margin resets across retail channels.

Still, the report also made clear that underlying pressures haven’t disappeared. Core inflation—the measure that excludes energy and farm products due to their high volatility and that the Bank of Mexico closely tracks—rose 0.19% in the first half of the month and came in at 4.12% year over year, above the 3% target.

Within core inflation, services remained the main source of persistence, with an annual increase of 4.57%. For goods, processed foods, beverages, and tobacco rose 5.13% year over year, underscoring that built-up costs (inputs, transportation, packaging) take longer to unwind—even when some commodities see temporary relief.

In the near term, the mix of headline inflation within the target range (3% +/- 1 percentage point) and still-elevated core inflation keeps a delicate balance for monetary policy: room to cut rates depends on the slowdown holding up without relying solely on farm-product volatility, and on services—typically slower to adjust—confirming a clear downward path.

Tourism, Mobility, and Consumption: the “Floor” Under Service Prices

The first half of June also included increases in categories tied to mobility and tourism, amid stronger seasonal demand and events that boost occupancy and travel costs. Airfare jumped 13.75% over the two-week period; hotels rose 8.73%; and packaged travel services increased 4.07%—moves that help explain why service inflation is proving more stubborn than fresh-food inflation. At the same time, high-demand everyday items like avocados climbed 18.51% in the period, a reminder that the basket can face simultaneous shocks: while some vegetables drop, other foods rise due to seasonality, exports, or supply disruptions.

This pattern matters for disposable income: households may feel some relief at the grocery store when fruits and vegetables get cheaper, but that benefit fades if services—transportation, lodging, dining out—keep rising faster than average. At the macro level, persistent service inflation is often tied to wage-cost pressures, rents, and slower pass-through, which can extend the timeline for inflation to converge to target.

Looking ahead, the challenge for inflation isn’t just keeping the headline rate within the range, but getting core inflation to confirm a clearer downward trend. With economic activity moderating while service prices remain firm, the main takeaway from the data is twofold: the relief is real, but it still isn’t broad-based across all components that shape the cost of living.

In short, inflation eased thanks to the adjustment in farm products, while higher service prices keep the debate open about how fast disinflation can move—and how much room there is for future monetary policy decisions.