Venezuela: Headline inflation declines markedly owing to base effect
May 3, 2011
In April, the consumer price index for the Caracas Metropolitan Region rose 1.31% over the previous month, which was below the 1.55% price increase recorded in March and represented the lowest price increase since November 2010. The monthly rise was mostly driven by higher prices for alcoholic beverages (+3.04% month-on-month), while prices for food and non-alcoholic beverages increased a more moderate 0.92%. Meanwhile, annual inflation declined markedly from 28.7% in March to 23.9% in April, its lowest level since January 2008. The annual reading reflected a base effect, as prices spiked in April last year when the government eased some food price controls in order to alleviate shortages. The core inflation index, which excludes volatile items such as fresh food, oil, and other goods where the government exercises price controls, rose a modest 1.83% over the previous month (March: +2.88% mom), driving annual core inflation down to 32.0%. Meanwhile, the government decided to increase the minimum wage in 2011, which will add further pressure to prices. The presidential decree includes both the public and private sector, and is to be implemented in two stages. In May, salaries will rise by 15%, while another 10% increase will take effect on 1 September. In addition, the public employees' wage will rise 45%. Annual average inflation slowed somewhat to 28.7% in April from 29.4% in March.