Argentina: Inflation remains untamed in September
October 16, 2017
According to the National Statistics Institute (INDEC), consumer prices in the Greater Buenos Aires capital area rose 2.0% in September from the previous month, up from August’s 1.5% increase and overshooting market expectations of a softer 1.3% increase. Core consumer prices in the Buenos Aires metropolitan region also picked up from 1.5% to 1.8% in September. Inflation in the Greater Buenos Aires capital area increased from 23.1% in August to 24.2% in September, moving further above the Central Bank’s 12.0%—17.0% target for this year.
Data for the monthly variation in consumer prices for the whole country in September showed that consumer prices rose 1.9% from the previous month, coming in above August’s 1.4% increase. The result reflects higher prices for all main components of the index, with clothing and footwear, education and health coming in on top. Alcoholic beverages and tobacco, and transportation were the components that reported the smallest increases. Core consumer prices, which exclude volatile and non-regulated products, rose 1.6% month-on-month (August: +1.4% mom).
The latest data compiled by the Statistical Institute of the City of Buenos Aires showed that inflation accelerated from 25.9% in August to 26.2% in September, the highest reading in five months. The different 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 homogeneous. This is due to different baskets of goods, samples and data collection methodologies.
September inflation data comes as a blow to the government and the Bank. The increases in monthly core consumer prices continue to exceed the 1% target outlined by the monetary authorities, to lower the over 20% inflation in 2018. Stubbornly-high inflation is a persistent problem for the government since it will have to continue accumulating external debt to finance the fiscal deficit as the government plans to cut elevated public spending. Additionally, the inability to anchor inflation to Central Bank objectives implies that short- and middle-term estimates on government spending, earnings and the fiscal deficit could be underestimated.