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ARGENTINA – Inflation rose in August

September 16, 2020

Headline inflation increased in August, in line with expectations and led by core items.

Headline inflation increased in August, in line with expectations and led by core items. The CPI increased by 2.7% mom in August, up from 1.9% in July. Inflation was slightly below the Bloomberg consensus estimate of 2.8%. Annualized quarterly inflation increased to 31.1% in the quarter ended in August, from 25.0% in the previous month. However, the 12-month inflation fell to 40.7%, from 42.4% in August.

Core inflation rose in August. Core item prices jumped by 3.0% mom in August, up from 2.5% in July, marking a third consecutive increase. Inflation continued to be led by price increases on durable products (electronic devices) and home appliances, which have likely been affected by import restrictions. Prices for food items increased by 3.5%, driven by price adjustments on some food and cleaning products, which are currently capped by the government. The core inflation reading increased to 36.5% (annualized) in the quarter ended in August, from 29.2% in July. Regulated prices rose by 1.0% mom and 9.2% annualized in the quarter ended in August, following an adjustment in fuel prices. The government froze prices of telecommunication services (cable TV, internet and mobile) in August, in addition to energy and transportation tariffs. Prices for seasonal products (mostly fruits and vegetables, and seasonal apparel) increased by 4.0% mom  and 46.3% annualized in quarter ended in August.

Price caps are likely to help keep inflation low this year, despite an expected steady acceleration in the coming months following the easing of social distancing measures. We forecast 37% inflation for 2020, down from 53.8% in 2019. However, inflation expectations for the next 12 months stand at 51.2%, according to the latest central bank survey, mostly fueled by the monetary financing of the fiscal deficit.



Juan Carlos Barboza
Diego Ciongo

 

 



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