Argentina: Inflation inches down as government reaches wage agreement with trade unions
May 15, 2013
According to official figures, consumer prices for the Great Buenos Aires area added 0.7% over the previous month in April, which mirrored the result recorded in March. Higher prices for clothing and footwear as well as for education were the main drivers behind the price increase. Despite the monthly rise, annual headline inflation inched down from 10.6% in March to 10.5% in April. The moderation in inflation seen in recent months stems largely from the effect of the supermarket price freezes approved in February and later extended in May. Against this backdrop, the Kirchner administration was able to conclude the annual round of wage negotiations with the country's main trade unions, capping salary increases at around 24%. In addition, the government has recently further extended part of the price controls until October, when mid-term congressional elections will take place. LatinFocus Consensus Forecast panellists see official inflation at 11.1% by the end of 2013, which is up 0.1 percentage points from last month's estimate. Participants estimate official inflation to end next year also at 11.1%.
Official inflation data published by the National Statistics Institute (INDEC) have been met with suspicion ever since a controversial methodological change was implemented in 2008. These statistical issues have caused Argentina to become the first country ever to be censored by the International Monetary Fund (IMF) for not supplying accurate economic data, under a procedure that can end in "compulsory withdrawal" from the IMF. The government has repeatedly denied allegations that INDEC data are manipulated and, in March 2011, went a step further by fining a number of consulting firms for publishing their inflation estimates. However, a court decision on 15 May recently overturned the heavy fines imposed on the consulting firms.
Independent inflation estimates have been collected since 2011 by a group of opposition lawmakers to elaborate an alternative monthly inflation gauge. According to this so-called "Congress Index" (IPC-Congreso), consumer prices increased 1.5% over the previous month in April (March: +1.5% month-on-month). Meanwhile, annual inflation slowed from 24.4% in March to 23.7% in April, the lowest level in 12 months. Independent analysts surveyed by LatinFocus expect consumer prices to increase 28.0% in 2013, which is down 0.1 percentage points over last month. For 2014, analysts see inflation moderating to 26.5%.
Author: Armando Ciccarelli, Head of Data Solutions