Fueled by food and the increase in fuel inflation in July was 3.1%

In July, at 3.1%, national inflation was higher than forecast by private consultants. Thus, in the first 7 months of the year, the rise in retail prices accumulates an increase of 19.6% and adds an annual trajectory of 31.2%, according to INDEC data.

Inflation in July was driven by the increase in food prices (4%), transportation that includes fuel (5.2%) and recreation and culture (5.1%) due to expenses related to tourism. On the other hand, due to the seasonal liquidations “clothing and footwear” had a 0.1% decrease.

The foods that increased the most were flour (11.2%), dry noodles (5.2%), hake filet (5.3%), palette (3.5%), banana (8.8%) , sweet potato (10.4%), yerba mate (5.5%), sausage (4.5%), round tomato (38% by seasonal factor)), while the price of lettuce dropped (-13.1% ) and orange (-7.4%), according to the INDEC data for Capital and GBA. In toiletries and cleaning highlights cotton (6.4%), deodorant (5%), soap powder (5.1%) and bleach (3.9%).

These data explain why core inflation -with no seasonal and regulated products- was higher (3.2%) and also higher in seasonal prices (3.8%). And they anticipate that the inflation of the basket of indigence – which takes into account basic foodstuffs – was much higher than average inflation.

By regions, with 3.6%, the Cuyo region leads the ranking of highest inflation, followed by 3.4% by the NOA and NEA, 3.3% by the Pampas region, 3.2% by Patagonia and 2.8% Capital and GBA. This last data is very coincident with the 2.7% registered by the Buenos Aires Bureau of Statistics and Censuses in the City of Buenos Aires, accumulating in the first seven months of the year a rise of 19.5% and 31% year-on-year. Meanwhile, with the 3% in July and a rise of 34.3%, Mendoza registered the highest year-on-year increase and boosted the high levels of the Cuyo region. For its part, in Córdoba inflation in July was 3.52% according to
the Statistics and Census Bureau of that province.

It is discounted that inflation will continue at high levels. The consultancy LCG notes that “August will be a month of rising inflation, with occasional increases such as the rise in electricity (+ 24%), fuels (+ 6%), prepayments (7.5%), domestic service (12). %), Electricity (+ 24%) and Public transport of passengers (Collectives and Trains 10%, Subway 67%), which will be partially liquefied because it began to be applied in the middle of the month, but will leave a carryover for September “. In addition, adds LCG, “the recent upturn in the exchange rate could add pressure on prices in August and, given the usual lag of the transfer of the devaluation, also to September, but the monetary squeeze of the BCRA (with promise of rates to 45% until October) and the recessive effect that we expect for the coming months may not validate a surge in prices “. For all this, “we estimate that inflation will be above the annual 34% in December”.

Economist Camilo Tiscornia admits that the July figure complicates compliance with the 32% goal agreed with the IMF. August could have an index of the order of 3% and the “hope” is that December can close below 3%. The key is in the value of the dollar and future increases in public services. “

The Letter of Intent sent to the IMF says that if the CPI inflation rate exceeds 32% “the authorities will consult the IMF Executive Board on their policy response proposal before disbursements of the agreement are available. “

Edison Carroll

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