Argentina Inflation


Argentina: Increase in consumer prices slows to five-month low in May

May 15, 2014

Consumer prices increased 1.4% over the previous month in May according to the new inflation index elaborated by the National Statistics Institute (INDEC). The reading came in below the 1.8% increase recorded in the previous month and undershot market expectations of a 1.6% rise. That said, consumer prices have jumped 18.0% since the beginning of the year. The slight deceleration tallied in May mostly reflected smaller increases in prices for food and beverages, transportation as well as for housing.

The new inflation index measures prices nationwide, whereas the previous readings were based solely on Buenos Aires and the surrounding metropolitan area. The new index was unveiled in February in the hope of restoring confidence in official inflation data and in response to the timeline 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 was 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.

The new inflation figures, however, have not completely dispelled suspicions of underreporting, as the price increases that the INDEC has reported are below local private analysts’ independent estimates. According to the so-called “Congress Index” (IPC-Congreso), which is an alternative inflation gauge based on independent estimates that opposition lawmakers collect, consumer prices increased 2.3% in May over the previous month (April: +2.8% month-on-month) and annual inflation rose from 39.0% in April to 39.9% in May, marking the highest level since independent inflation records first began in June 2011.

On the back of the new inflation estimates, panelists revised up their projections for official inflation. LatinFocus Consensus Forecast panelists see official inflation at 30.0% by the end of 2014, which is up 0.6 percentage points from last month’s estimate. Panelists estimate that official inflation will slow to 27.5% by the end of 2015. Forecasts for the non-official inflation gauge point to even higher figures. Panelists surveyed by LatinFocus expect non-official consumer prices to increase to 36.0% in 2014, which is up 0.7 percentage points over last month’s forecast. Analysts see non-official inflation slowing to 31.0% in 2015.

Author: Ricard Torné, Lead Economist

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