Source: Nadín Argañaraz

Year-on-year inflation August 2021

Source: Nadín Argañaraz

The highlight in August was the slowdown in food and beverages, the division with the highest incidence in the CPI, mainly due to a drop in the price of vegetables in almost all regions. In parallel, the stability in meat value it also contributed to food rising just 1.5% in the last month.

“Inflation was at the lower limit of the range that we projected, with some surprises, particularly in the food item. This is because there were some items that fell, such as some cuts of meat, from the export ban, and fruits. and vegetables, which offset stronger increases such as dairy or baked goods, “the economist and financial consultant said in dialogue with Ámbito. Rodrigo Alvarez.

For its part, Agostina Myronec, an analyst at Ecolatina, remarked that “the slowdown in meat could be foreseen by looking at the Liniers Market and how the wholesale price was loosening from the second half of June, which had a lagged impact on the retail price.” “In 4 of the 6 regions, meats climbed below 1% in August,” he deepened.

In Greater Buenos Aires, there were declines in round tomatoes (-11.7%), orange (-7.4%), potatoes (-4.1%), lemon (-4.1%) and minced meat (-3.5%).

The contraction in vegetables also explained much of the strong decrease in seasonal prices, which went from increasing 4.9% in July to only 0.9% in August.

Among the rest of the divisions, slowdowns were also observed in alcoholic beverages and tobacco, housing and basic services, and restaurants and hotels.

At the other end, the steepest increases of the month were verified in education (+ 4.2%) and health (+ 4.2%). The latter was influenced by increases in drugs and the adjustment of up to 9% that the Government validated for prepaid.

With these numbers, inflation chained its fifth consecutive month down and it was slightly below the 2.8% predicted by the consulting firms and financial entities that participated in the last Market Expectations Survey (REM) of the Central Bank (BCRA).

Inflation January-August 2021

Source: Ministry of Economy

Source: Ministry of Economy

“The August number is very good news, which surprised the market. The slowdown in food was even more surprising. For us, inflation in food has always been above the general average. It is an isolated data, I could not assure that this it is going to be maintained, “the chief economist of CREEBBA told this medium, Gonzalo seed.

Regarding the causes of the slowdown in recent months, the director of the consulting firm EPyCA, Martin Kalos, explained that it has to do mainlywith the series of administered or frozen prices, such as the dollar (which has been growing at a rate of 1% per month since May), utility rates and wages, which have been falling for 40 months in real terms beyond a few months with slight recovery “.

On the other hand, for the economist the contractionary policy that the Central Bank has been carrying out in 2021 also influenced to compensate for the strong monetary issue of 2020 due to “the lack of financing left by the government of Mauricio Macri and the pandemic.” “Both the money supply and the monetary base are growing below inflation,” he explained.

The Minister of Economy Martin Guzman He pointed out days ago that the government expects the “downward path to continue.” “Due to seasonality there may be a fluctuation between one month and another, but today Argentina is in a gradual and persistent process of disinflation,” he said.

For its part, the private sector expects increases to be around 2.7% / 2.8% from here to the end of the year except in December, when they expect a slight acceleration due to seasonal reasons. If its projections are met, accumulated inflation for 2021 would turn around 48%.

It should be noted that the core inflation, which does not take into account seasonal factors or prices regulated by the government, remained at 3.1% last month.

In this regard, Myronec asserted that “when you look at the prices of mass consumer goods, such as packaged foods or those related to personal care and the home, you see that they are with higher dynamics than the rest.” “It is one of the main concerns,” he said.

In line with this view, Álvarez is concerned “that the core component remains stable because it shows some resistance to the official policies of freezing rates and delaying the exchange rate, which are the imbalances to be corrected in 2022.”

In this context, while some analysts warn that monthly inflation may approach the 2% zone, others project that it will remain closer to 3%.

“If food and beverages remain at these levels, and if education, health and clothing loosen, it may reach 2%. In any case, it is necessary to see if the rate of devaluation increases in the coming months. Also, always in order During the year, the CPI tends to overheat due to the holidays, the Christmas bonus and the proximity of the holidays, “clarified Semilla.

For Kalos, “the most probable thing is that the decrease in inflation will be very slow and that it will not be exempt from some setbacks”. “The most important thing is that a path of disinflation stabilizes. Even if it remains in this 2.5% zone, but with prospects of continuing to decline and not jumping at some point because rates or the type of nominal change, “he concluded.

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