Bird-Flu Outbreak Seen Pressuring Mexico Inflation Anthony Harrup - Dow Jones
go to original July 24, 2012

MEXICO CITY - An increase in egg prices following an outbreak of bird flu in western Mexico is expected to have pushed consumer prices higher in the first half of July, helping to keep the annual inflation rate above the central bank's target range for a second consecutive month.

The consumer price index likely rose 0.31% in the first two weeks of July, according to the median estimate of 12 economists polled by Dow Jones. That would push the annual rate up to 4.36% from 4.34% at the end of June.

Egg prices rose recently following an outbreak of bird flu in the western state of Jalisco, which as of last week had prompted the slaughter of 3.8 million chickens as part of government-containment efforts. The H7N3 virus doesn't affect humans, although the slaughter of chickens has raised concerns about future egg supplies, and the government is seeking to facilitate egg imports.

"While the temporary shock from eggs is already subsiding and tomatoes--which jumped by 37% in June--appear to have stabilized, a challenging comparison base should keep annual inflation readings above the 4% threshold until the end of the year," Morgan Stanley said in a report.

The Bank of Mexico said in its monetary-policy statement Friday that short-term risks to inflation have increased because of agricultural prices, although it expects annual inflation to meet its forecast between 3% and 4% toward the end of 2012 and in 2013. The central bank's specific CPI target is 3%, plus-or-minus one percentage point.

Core CPI, which excludes energy and fresh fruit and vegetables, is expected to have risen 0.17% in the first two weeks of July, nudging the annual rate up to 3.52% from 3.50% at the end of June.

Write to Anthony Harrup at anthony.harrup@dowjones.com

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