Itaú BBA - PERU – Headline and core inflation accelerated in March

Macro Latam

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PERU – Headline and core inflation accelerated in March

abril 1, 2019

CPI was pressured by seasonality in prices from vegetables and legumes and education services

CPI was driven by seasonality effects from vegetables and legumes and education services. March’s CPI posted a month-over-month rate of 0.73% (from 0.49% a year ago), above our forecast of 0.66% and median market expectations of 0.58% (as per Bloomberg). The CPI figure was pressured mainly by a seasonal increase in prices of  education services (4.06% month-over-month, form 3.90% a year ago) and of legumes and vegetables items, which increased 4.63% (from 1.08% a year ago) also affected by road blockades.  

On an annual basis, headline and core inflation accelerated in March  Annual headline inflation reached 2.25% in March (from 2.00% in February). According to the breakdown, core inflation (excluding energy and food items) accelerated to 2.56% (from 2.39%). In turn, food and beverage prices accelerated to 1.90% year-over-year in March (from 1.49%). Still, the indicator that tracks the percentage of items with annual inflation above the 2% target remained practically unchanged at 32% in March (from February).The diffusion index continues to show pretty low inflation across a broad range of goods and services. 

At the margin, headline and core inflation also accelerated. The seasonally-adjusted, three-month annualized variation of the CPI was a still-low 1.42% in March (but up from 1.03% in February), while core inflation (excluding food and energy) accelerated to 3.12% in March (from 2.66% in February).

We forecast annual headline inflation of 2.6% by the end of 2019, supported by a recovery of domestic demand. In particular, core inflation (excluding energy and food items) seems to be accelerating gradually, reflecting the state of the economy.  
 

João Pedro Bumachar
Julio Ruiz



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