Using industry-specific cost indexes to monitor sources of pressure on inflation

This article constructs industry-specific cost indexes at the highest disaggregation level using input–output (I–O) tables for Mexico from January 2005 to July 2024. These indexes are constructed as a weighted sum of the best available estimates of the evolution of production input costs, with weights given by each input's share of total industry costs. To illustrate the usefulness of cost indexes, the authors link each item in the CPI basket in Mexico with the industry that produces it. The authors argue that these cost indexes illustrate the changes in and the sources of consumer price increases over time in Mexico and explain the inflationary episode in the aftermath of the COVID-19 pandemic.