In August, general inflation data in Argentina showed a monthly growth of 4.2%, according to data released Thursday by the National Institute of Statistics and Censuses (Indec). This is more than expected by the government of Javier Milei and economic experts. With this result for the eighth month, Argentina is left with an interannual CPI of 236.7% and a cumulative CPI in 2024 of 94.8%.
On the face of it, the numbers could be good, as they are still in single digits, which has caused a slowdown in the inflated year-on-year figure that Javier Milei’s administration has been trying to control since he arrived at the Casa Rosada (presidential residence in Buenos Aires) in December last year. But August prices show that the country’s disinflation process has slowed slightly, if not stopped.
According to figures published in the Indec report, public services, education and transport are the items that led to the increase in prices last month. For its part, foodone of the most observed categories, remained lower than general inflation. Thus, transport prices increased by 5.1% compared to July and education 6.6%. But the division with the biggest increase last month was housing, water, electricity and fuel, which increased by 7% per month, due to the increase in rents and supplies.
As soon as he came to power, Javier Milei began a campaign of budgetary austerity with significant cuts in public transport and energy subsidies. Since the introduction of this measure, transport in Buenos Aires, for example, has become almost 40% more expensive.
Several experts agree that the disinflation process has stalled or even slowed down. From the Argentine consulting firm ACM, they said in a report that “it seemed” that monthly inflation had stagnated at 4%. Instead, they reaffirm that disinflation processes “are not linear,” since some trends are difficult to reverse.
Adriana Dupita, economist at Bloombergsaid the monthly price increase is twice as high as the monthly rate of currency depreciation, showing that “additional measures may be needed to strengthen disinflation in Argentina.”
The expert says that the reduction in import taxes in September will entail “fiscal costs and jeopardize the accumulation of reserves”, which is why she believes that it will have “a limited and short-lived impact”, especially on the CPI of September and October, even though many experts suggest that prices will move in September between 3.5 and 4%.
Generally speaking, this stagnation of monthly inflation can be seen if we look back at the previous months. In July, the CPI was 3.8% per month and in June and May it was 3.7%.
The Ministry of Economy, headed by Luis Caputo, issued a statement in which it explained that beyond the volatility shown in the short term with these August data, it is necessary to analyze “the behavior of the moving averages of the CPI variations.” This means that we must see the entire disinflation process, “with the three-month moving average of the variation of the national CPI being, with that of the previous month, at the lowest level since February 2022, and that of six months, which results in the lowest since March 2023,” they explained.
The goal of Milei’s economic administration is to bring monthly inflation to 1% by the end of 2024, but experts consider this scenario to be quite distant. At the LCG consultancy, they say that reducing inflation from 4% to 1% “is a major challenge.” than lowering it by 20% in DecemberThe experts of this entity base their argument precisely on this “stuffing” that the data has shown in recent months.
In general, economists believe that inflation will continue to fall, even sharply over the next 12 months, to around 44.7%, according to a survey conducted by the Central Bank of Argentina. The survey, published on September 5, concludes that economists expect annual inflation to fall to 122.9% in 2024.
