Argentina Inflation


Inflation drops to lowest level in nearly two years

Consumer prices in August increased 1.2% over the previous month, according to the inflation index elaborated by the National Statistics Institute (INDEC). The reading followed the 1.3% increase seen in the previous month and was mainly driven by higher prices for food and beverages as well as for transport. Inflation inched down from 14.9% in July to 14.7% in August, thus hitting the lowest rate since December 2013.

Argentina’s inflation index, which was introduced early last year, measures prices nationwide, whereas readings prior to February 2014 were based solely on Buenos Aires and the surrounding metropolitan area. The index was implemented in an effort to restore confidence in official inflation data, while also meeting the deadline that the International Monetary Fund (IMF) set in December 2013 requiring Argentina to release new GDP and inflation figures by March 2014. The previous inflation index had been viewed with suspicion both within the country and abroad for underreporting inflation figures, which prompted the IMF to censure Argentina for not supplying accurate economic data.

Suspicions of underreporting, however, have not been completely dispelled as the price increases that the INDEC has been reporting have been far below local private analysts’ independent estimates. The so-called “Congress Index” (IPC-Congreso), which is an alternative inflation gauge based on independent estimates that opposition lawmakers collect, increased 2.2% over the previous month in August (July: +1.9% month-on-month). The IPC-Congreso inched down from 27.2% in July to 26.6% in August.

LatinFocus Consensus Forecast panelists expect official inflation of 20.8% at the end of 2015, which is down 0.9 percentage points from last month’s estimate. Panelists estimate that official inflation will end 2016 at 24.4%. Panelists revised downward their forecasts for non-official inflation, although their projections are still higher than official inflation expectations. The panel expects non-official inflation of 30.4% in 2015, which is down 1.1 percentage points from last month’s forecast. Analysts see non-official inflation slowing to 28.2% in 2016.

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