Analysis: inflation reaches 3.91% as fuel and food push up business costs

Consumer prices in El Salvador rose 3.91% in the twelve months to October 2026, the highest annual rate of the year, according to Consumer Price Index (CPI) figures published by the Central Reserve Bank (BCR) on 9 November and reported by La Prensa Gráfica. Diario El Mundo noted that it is the highest rate since June 2023, up from 3.60% in September.

The rise has built up steadily through the year. Annual inflation was 0.65% in January, Diario El Mundo reported, and 2.16% in April, according to La Prensa Gráfica. Transport explains much of the change. The transport index started 2026 with falling prices, at -3.27% in January, turned positive at 3.33% in April as international oil prices rose with the escalation of conflict in the Middle East, and reached 10.63% in October, Diario El Mundo reported from BCR data.

Food is the second driver. Prices of food and non-alcoholic beverages, the division with the largest weight in the index, rose 5.06% on a year earlier, the highest rate since October 2023. Eggs, vegetables, fruit and French bread have shown the largest increases this year, according to the BCR's statistics office (ONEC), and the urban basic food basket reached $269.15 in September, its highest recorded value. Not every category is rising: housing, water, electricity and gas rose 2.14%, while clothing and footwear (-1.05%) and communications (-0.70%) were cheaper than a year earlier.

El Salvador's rate sits in the middle of the region. In Guatemala, annual inflation eased to 4.38% in October from 4.69% in September, the National Statistics Institute reported, still above the central value of the Bank of Guatemala's target, Prensa Libre wrote. The Dominican Republic recorded 5.14%, which its central bank attributed largely to the global energy shock, while core inflation fell to 4.54%, within its 4.0% ± 1.0% target range, EFE reported. Costa Rica stands apart at 0.55%, positive for only the second month after 16 months of falling prices and below its central bank's 2% to 4% range, according to EFE. Across these economies, fuel and food are the common pressure points.

Forecasts differ on where the rate goes next. In its October report on El Salvador, the International Monetary Fund (IMF) projected average annual inflation of 2.7% in 2026 and 2.1% in 2027, linking this year's pressures to higher oil prices and the El Niño weather pattern, which could raise food prices, La Prensa Gráfica reported. Otto Rodríguez, an economist and former BCR vice-president, takes a less benign view: he said inflation has been rising since mid-2025 and could reach 5% by the end of 2026, and calculated that in October prices rose at an annualised rate of 7%, and food at 10.26%.

For companies, the clearest effect is on costs. A transport index up by more than 10% in a year feeds into distribution, logistics and the price of imported inputs, and weighs on sectors with thin margins such as retail, food processing and restaurants, where prices rose 4.61% on the year. Food producers face a mixed picture: higher selling prices, but also higher costs and weather risk from El Niño.

Wages are the second issue. Rodríguez estimated that the minimum wage has lost $17.80 of purchasing power since its last adjustment in June 2025, and warned that persistent inflation could create pressure for a new increase, with consequences for the cost of formalisation for micro and small businesses. Employers planning 2027 budgets may need to allow for that possibility, although no decision has been announced. He also warned that vulnerable households could cut consumption, which matters for consumer-facing businesses, and proposed wider use of public food markets, more subsidies and incentives for domestic production, arguing that reliance on imports creates supply and price risks.

There is also a relative side. On October figures, prices in El Salvador are rising more slowly than in Guatemala and the Dominican Republic, but much faster than in Costa Rica. For firms that compare production locations in the region, cost trends depend on the mix of fuel, food and wages in each operation rather than on the headline rate alone.

What to watch next: the BCR's core inflation index for October, scheduled for 11 November; the November CPI on 7 December; and the December CPI on 8 January 2027, which will show how 2026 closed against the IMF projection, according to the BCR's release calendar. Beyond the data, oil prices, the effect of El Niño on harvests and any review of the minimum wage will shape the path of prices and costs in 2027.