Itaú BBA - PERU – Inflation accelerated in April

Macro Latam

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PERU – Inflation accelerated in April

mayo 2, 2019

CPI was driven by an increase in prices of bus transportation, tourism related services and seafood due to Easter holidays

April’s CPI was driven by seasonal factors. April’s CPI posted a month-over-month rate of 0.20% (from -0.14% a year ago) The CPI figure was pressured mainly by an increase in prices of bus transportation (1.2% month-over-month); tourism related services (1.1%) and seafood products (5.6%) due to Easter holidays. Fruits and legumes prices also exerted upward pressure due to seasonal factors, increasing 3.3% month-over-month.  

On an annual basis, headline inflation accelerated in April. Annual headline inflation accelerated to 2.59% in April (from 2.25% in March). We note there is an unfavorable base effect in April (which pushes annual inflation up), as monthly inflation in April last year was negative (-0.14% month-over-month). According to the breakdown, core inflation (excluding energy and food items) accelerated slightly to 2.59% (from 2.56%). In turn, food and beverage prices accelerated to 2.65% year-over-year in April (from 1.90%), also affected by the unfavorable base effect (-0.38 month-over-month in April 2018). The indicator that tracks the percentage of items with annual inflation above the 2% target increased slightly to 34% in April (from 32% in March). The diffusion index continues to show pretty low inflation across a broad range of goods and services. 

At the margin, headline inflation also accelerated, while core inflation decelerated slightly. The seasonally-adjusted, three-month annualized variation of the CPI was 2.54% in April (from 1.59% in March), while core inflation (excluding food and energy) decelerated to 2.91% in April (from 3.14% in March).

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

Julio Ruiz

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