The acceleration of inflation throughout 2021 put industrialists, merchants and consumers in Mexico in check; and although some entrepreneurs have had to absorb the increases in inputs at the expense of profit margins in order not to reduce their sales, this is not generalized, which ends up being reflected in higher prices for products for the final consumer.
The industrial sector in Mexico has registered increases in producer prices between 10.3% and 50% as part of the inflationary rise, however, “we are absorbing the increases, sacrificing, to be able to sell,” said its president José Abugaber.
Last year, the inflation faced by companies, measured through the National Producer Price Index (INPP) was 10.3% (in 2020 it was 3.7%), while the inflation faced by consumers, measured through of the National Institute of Consumer Prices (INPC), was 7.4% (in 2020 it was 3.2%), according to the National Institute of Geography and Statistics (Inegi).
The leader of the Confederation of Industrial Chambers (Concamin) explained that some companies have absorbed the increases, and this has reduced their profitability of business and production, to avoid market contraction.
He specified that industries such as food have presented increases of 16% on average, companies that have transferred the increases to the merchant, and that consumers will have to pay.
Héctor Tejada, president of the Confederation of National Chambers of Commerce, Services and Tourism (Concanaco-Servytur), said that, even though inflation is worldwide, the Mexican economy is additionally under pressure in some products –such as fuels– due to adjustments Annual Special Tax on Products and Services (IEPS).
“It is inevitable that a merchant in charge of a restaurant does not transfer the increase in gasoline in the services and food that it offers, which also drags the prices of food and other products,” he said.
After Covid-19, the closure of economic activity, inflation and the arrival of the Omicron variant, both businessmen affirmed that both manufacturers and merchants must take very firm steps “because the situation is not easy.”
“There are disruptions in the supply chains; they are broken and as long as they are repaired, inflation continues to be generated. The shortage of components and products continues to occur (after companies in the world stopped production due to the pandemic or some closed due to the economic situation of lower global demand),” said José Abugaber in an interview with El Economista.
For his part, the president of Concanaco reported that strategies are already being discussed with the authorities of the Ministry of Economy, who are “concerned” about price increases, and the president of the National Association of Self-Service and Department Stores ( ANTAD), Vicente Yáñez, also activated alerts of increases in its products, which can lead to a contraction of the economy.
“Activities are already being sought to reduce inflationary impacts”, even as merchants we have asked consumers to purchase seasonal products to stop the spiral, said Héctor Tejada.
The commerce sector had the expectation of growing 4% at the end of 2022, but with the rise in inflation in recent months, the forecast has been reduced to 3.5%, due to the decline in sales.
The effects of high levels of inflation already have their impact on the behavior of consumers, who apply “discrimination” on products and brands of significant importance versus the categories where they will reduce their consumption, assured the market analysis company Psyma pulse.
Through its study Purposes of consumption 2022, the consulting company maintains that consumers have begun to replace their usual brands with more accessible options. For example, they have stopped buying cosmetics and perfumes, bought cheaper technology and will stop traveling.