Argentina: Inflation continues rising in January
February 16, 2018
According to the National Statistics Institute (INDEC), national consumer prices rose 1.8% over the previous month in January, coming in below December’s 3.1% rise. The result reflected higher prices in 11 of the 12 components of the index. Transportation, recreation and culture, restaurant and hotels were the components that increased the most, while clothing and footwear was the only subcomponent that declined. Core consumer prices, which exclude volatile and non-regulated products, also rose 1.8% month-on-month (December: +1.7% month-on-month). National inflation as measured by INDEC increased from 24.8% in December to 25.0% in January.
The latest data compiled by the Statistical Institute of the city of Buenos Aires showed that consumer prices in the city of Buenos Aires moderated from a 3.3% month-on-month increase in December to a 1.6% rise in January. The year-on-year variation in consumer prices moderated from 26.1% in December to 25.8% in January. The inflation data released by the Statistical Institute of the city of Buenos Aires and INDEC are not comparable, as the two index structures are not homologous. This is due to different baskets of goods, samples and data collection methodologies.
Inflation in February is expected to remain elevated, as additional increases in the prices of electricity, transportation, communication and medicine came into effect on 1 February. These recent cuts in subsidies were part of government efforts to slash elevated public spending and rein in the fiscal deficit. Persistently high inflation as the government must accumulate more external debt to finance elevated public expenditure. This in turn is keeping the fiscal deficit elevated. While external debt levels are considered to be on a sustainable footing, the increased likelihood that the U.S. Federal Reserve will raise interest rates at a faster-than-expected rate this year could substantially bump up Argentina’s debt burden and increase the economy’s exposure to external shocks.
Argentina Inflation Forecast
Panelists surveyed for this month’s LatinFocus report expect inflation in the province of Buenos Aires to be 21.5% at the end of 2018, which is unchanged from last month’s estimate. Panelists estimate that inflation will end 2019 at 14.9%.