How do Mexicans deal with inflation?

Mexicans fight against the increase in the price of products and a decrease in purchasing power. Despite the fact that in the first half of October inflation led to three fortnights of slowdowns, it was not enough to lessen the effect on the household economy. In this scenario, families have implemented different actions.

“People of all economic levels and of different ages, told us to perceive increases in all categories and products they consume, 70% of Mexicans observe increases in energy and food, this caused people to rethink their economic situation and consequently made a series of adjustments in favor of their pockets,” said Iván Castro, director of the Planning Quant consultancy.

Despite the economic problems, the study details that Mexicans prefer to take actions such as reducing their expenses, consumption and even replacing food brands to take care of their income in the face of economic uncertainty before resorting to canceling services such as pay television, since only 36% of those surveyed said they took this option as an alternative.

The strategies most used by Mexicans are aimed at reducing the impact of rising food prices. According to the study “The effect of inflation in Mexican households”, 84% of families pay more attention to prices when making their purchases, while 66% reduced the consumption of some products or chose to replace the items for less expensive ones.

The main affected by the continuous rise in food and those who have implemented these actions with greater impetus are unemployed or retired people, as well as divorced people or those over 55 years of age.

The very wise population has implemented actions to solve the increase in food prices that range from canceling the consumption of some, opting for cheaper brands, and there are even those who have chosen to make purchases in bulk, mainly in items such as beans, sugar, rice and lentils, explained Cuauhtémoc Rivera, president of the National Alliance of Small Businesses (Anpec).

On the other hand, 78% of single people, as well as 83% of workers in the public and private sectors, are the ones who have most suffered from the increase in energetics. Those who have a car have reduced their use in order to improve their pocket status by achieving savings, the study indicates.

Loans, option to obtain liquidity

Regarding financial services, 48% refer to having taken out a loan to obtain greater liquidity. Self-employed people are one of the driving segments of this strategy, since at least 68% think of this option to face inflation.

“We have observed a much more careful consumer. Today the price is weighed and before they were not so focused on this item, however there is an effort to continue consuming the same services although with a restricted budget –we hope that families restructure their spending to attend to priority items”, commented Iván Castro.

Core inflation was 8.39% in the first half of October, the highest variation since the second half of August 2000. Food and energy are the items that put the most pressure on price increases. The economic crisis has led to a perception of anguish and changes in the management of personal finances, since 84% of those surveyed believe that inflation will continue to rise next year.

The most unequal inflation

The goods of the basic basket and food prices have mainly affected those with less purchasing power. According to the Mexican Institute for Competitiveness (IMCO), inflation affects families with fewer resources, since 10% of these households spend more than 50% of their spending on food purchases.

In contrast, households with higher income only spend 28% of their income on food and allocate their resources to items such as education or vehicle maintenance, which have lower inflation rates.

Ana Bertha Gutiérrez, coordinator of Foreign Trade and the labor market at Imco, explained that unlike other periods of inflation, this one shows greater inequality between social strata due to the rise in prices of products within the basic basket and not only energy, as has occurred in other years.

“The composition of inflation has changed. In the pre-pandemic period, inflation was similar for all households and slightly higher for high-income households. The crisis impacts the purchasing power for the consumption of basic expenses of those who have the least, which widens the inequality gaps”, she commented.

joselyn.ugarte@eleconomista.mx