Mexico cost indexes signal inflation pressures across industries
A Bureau of Labor Statistics article examines how industry-level cost indexes in Mexico track the buildup of inflation pressures from January 2005 to July 2024. The analysis links production costs to consumer prices and suggests the measures can help policymakers distinguish between wage-driven, input-driven, and demand-driven inflation.
Highlights
- Industry-specific cost indexes for Mexico use 6-digit NAICS input-output tables, aggregating commodity, imported, domestic input, and formal labor costs by industry share.
- Imported goods and commodity prices in the indexes are referenced in U.S. dollars and converted to local currency using current exchange rates for analysis.
- Labor cost data derives from the average daily taxable income index in Mexico’s formal sector at 3-digit NAICS, excluding informal workers and limiting granularity.
Methodology tracks cost drivers by industry
As reported by U.S. Bureau of Labor Statistics, the article builds industry-specific cost indexes for Mexico using input-output tables at the 6-digit NAICS level, the narrowest industry classification available in the country. The indexes combine estimates of changes in commodity, domestically purchased input, imported input, and labor costs, weighted by each input's share of total industry costs.The authors link each item in Mexico's CPI basket to the industry that produces it to show how shifts in production costs relate to consumer price movements over time. For imported goods and commodities, prices are treated as referenced in U.S. dollars and converted into local currency using the exchange rate, with all series normalized to a common base period.
For labor costs, the study uses the index of average daily taxable income in Mexico's formal sector at the 3-digit NAICS level, based on data from the Mexican Institute of Social Security. The article notes two limitations, the wage proxy excludes the informal sector, and it is available only for more aggregated industry categories than the 6-digit cost indexes.
In our earlier article on the conflict-driven surge in crude oil shipping costs, we examined how disruptions on major tanker routes have pushed freight and insurance rates sharply higher, making transport a much larger share of oil’s delivered price. We also noted how these higher logistics costs can spill over from fuel into broader consumer prices, especially in import-dependent markets facing elevated and persistent shipping premiums.
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