Inflation: why food increased "little" and had the lowest rise since July 2020

Food, the most regressive of the increases. One of the most difficult to control and those that hurt the poorest households the most. Last month, the category was the surprise: increased 1.5%, well below the general level of inflation (2.5%), according to Indec data that were known yesterday. The rise was the lowest since July 2020, the month in which, amidst the restrictions harder for the pandemic, people, activity and money circulated at a slower rate than usual.

It was one of the main axes of the “positive” reading that he tries to do, with more or less success, the Ministry of Economy every time the inflation number comes out. “[La categoría] Food and drinks it fell sharply, from 3.4% in July to 1.5% in August. With slowdowns in most items, the drop in Vegetables and the stability of meats”, Indicated official sources.

Of course: Most of the cuts of meat had losses of up to 3.5%, surrounded by the “stocks” for export, that began to give its first results as expected by the Government. Although economists and agricultural referents who oppose the measure warn for the medium and long term, when the disincentive business could make heads of cattle come down, for the moment the measure makes the Executive’s results proud.

In the case of vegetables, the seasonality -that characteristic that makes prices go up or down depending on the season of the year- made his move and thus the round tomato (it fell -11.7%, although it is one of the ones that has risen the most so far this year), the Orange (-7.4%) and the lemon and the papa (-4,1%).

“Fruits and vegetables were growing below the general level and some fell; Meats slowed down after months of having grown quite a bit. These groups explain a good part of the slowdown and have a significant weight within the index ”, explains Federico Moll, director of the consulting firm Ecolatina. Food represents 20.33% of the entire index and, within that percentage, meats and derivatives take 6.98%, the largest “portion” within the subtitle.

If you double click on the information -with data from Indec it can be seen in the Greater Buenos Aires region- It is seen that within the category “Food and Drinks” food fell more than drinks such as coffee, tea and yerba, says María Castiglioni, partner of C&T Asesores Económica. “The key was the drop in vegetables, tubers and legumes of almost 4% and the rise in meats and very slight derivatives of 0.3%. Everything else, such as milk, baked goods and oil rose above 2% ”, he details.

The price of meat explains much of the decline

From the point of view of consumption and microeconomics, there are other explanations for why food does not rise as much.

There is a key ingredient in the equation: the end of Maximum Prices, the freezing due to the obligation that it included food, beverages, personal hygiene and cleaning items, and returned the values ​​to March 6, 2020. It lasted until June 8 of this year. “Food increased a lot when the price was released in recent months. In recent months, it was always the one that increased the most, while the rest of the items were more behind schedule ”, explains Facundo Aragón, partner of CompassLa.

Osvaldo Del Río, director of the consumer consultancy Scentia, details that the channel supermarkets (where most of the food is not sold, but does contribute to the overall level) “It is inflating less than other channels”, and that weighs in favor of the category not growing so much. For example, according to the data from the consultancy he directs, available until July, a basket of 1044 mass consumer products accumulates a rise of 20.2% in seven months, but if you double click on the channels, you can see that in supermarkets the variation was 17.8%, while in warehouses and supermarkets, where it is more difficult to impose controls, the increase was 23.2%.

The price of food was key to keeping inflation low in August together with regulated prices, such as electricity and gas rates and gasoline. However, so far this year the increases are of great magnitude in the case of tomato (165%), common wine (94%) and fresh hake filet (65%). Between August 2020 and August 2021, in turn, the impact of the increase in the value of meat is still being seen. In this case, the ranking is led by common wine (109%) and round tomato (89%), followed by three cuts of meat: roast (88%), rump (80%) and buttock (79%) .

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