Itaú BBA - ARGENTINA – Inflation spiked in December, as expected

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ARGENTINA – Inflation spiked in December, as expected

January 14, 2021

Noticeable acceleration in annualized quarterly inflation, which hit 54% in 4Q20.

Consumer prices showed a marked acceleration in 4Q20. The CPI rose by 4.0% mom in December (from 3.2% in November), in line with expectations according to the latest central bank survey. The drop in the 12-month inflation reading to 36.1% in December, from 53.8% in 2019, is shadowed by a noticeable acceleration in annualized quarterly inflation, which hit 54% in 4Q20 from 34.2% in the previous quarter.

Core inflation increased even further in December. Core item prices jumped by 4.9% mom, from an increase of 3.9% in November. The core inflation reading rose to 61.9% (annualized) in 4Q20, from 36.3% in September. Prices for seasonal products (which include seasonal apparel) increased by 1.3% mom in December and 74.3% year over year. Prices for regulated items (most of them frozen) rose by 2.6% mom and 14.5% yoy. 

The government recently extended the freeze on utility tariffs and introduced further price controls in response to higher inflation. We believe that the unorthodox attempts to tame inflation risk a high fiscal deficit, further monetary expansion, and renewed pressure on the FX market. We expect 50% inflation this year, but risks are tilted upward given the growing need to realign key prices.

Juan Carlos Barboza
Diego Ciongo



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