Argentina: Inflation holds in August
September 14, 2013
According to official figures, consumer prices for the Great Buenos Aires area added 0.8% in August over the previous month, which was slightly below the 0.9% increase recorded in July. Higher prices for food and beverages and for clothing were the main drivers behind the increase in prices. Annual headline inflation remained at the 10.6% registered in July. LatinFocus Consensus Forecast panellists see official inflation at 10.5% by the end of 2013, which is up 0.1 percentage points from last month's estimate. Panelists estimate that official inflation will rise to 11.5% by the end of next year.
Official inflation data published by the National Statistics Institute (INDEC) have been met with suspicion ever since 2008 when a controversial methodological change was implemented. The issues resulted in Argentina being the first country ever to be censured by the International Monetary Fund (IMF) for not supplying accurate economic data. The resulting procedure could force Argentina's government into "compulsory withdrawal" from the IMF. Against this backdrop, Argentinean authorities revealed that a new inflation index that was developed in cooperation with IMF officials will be unveiled before 29 September, which is the deadline established by the IMF to address the data quality issue. On 9 September, the Minster of Economy confirmed that the government is moving ahead with preliminary work to develop the new index, which will be put forward for acceptance by the IMF in a November meeting. Moreover, the government says that at least a year of tests and fine-tuning will be required before the index is ready, pushing back the launch date to 2015 if not later.
A group of opposition lawmakers began collecting independent inflation estimates in 2011 in order to develop an alternative monthly inflation gauge. According to their so-called "Congress Index" (IPC-Congreso), consumer prices increased 2.11% over the previous month in August (July: +2.55% month-on-month) and annual inflation rose from 24.9% in July to 25.2% in August, the highest level in six months. Independent analysts surveyed by LatinFocus expect consumer prices to increase to 26.1% in 2013, which is up 0.1 percentage points over last month's expectation. For 2014, analysts see inflation rising to 29.1%.
Author: Carl Kelly, Economist