After the end of 2020, which left an inflation of 36.1% as a balance, January is somewhat calmer than December (4%), although there is still concern about the increase in food and beverages, an item of great weight in the Consumer Price Index (CPI) and has a high impact among lower-income consumers. With the first two weeks of the month measured, economists point out that the rise in prices could be around between 3 and 3.5% in the first month of the year.
For the consultancy Ecolatina, for example, prices rose 3.9% between the first half of January and the same period in December. This dynamic was explained by the increases in some foods such as meat, fruits and processed meals and by the increase in fuel, insurance and services related to home maintenance. In addition, during the first half of the month, the core CPI, that is, the one that does not take into account seasonal price variations, remained above 4%.
As a consequence, the consulting firm projects that the price increase will be around 3.5% in the first month of the year. “This implies a slight slowdown compared to December 2020, but it reflects that the rise in prices persists at very high levels (50% annualized),” the consulting firm warned.
“If the exchange rate continues to adjust in line with past inflation, the inertia of the inflationary process will be even greater, maintaining the price rise at around 3% monthly average during the first quarter,” he explained. That level could only be pierced if price controls or agreements are strengthened and the official exchange rate slides at a slower pace, according to Ecolatina.
According to Lorenzo Sigaut Gravina, director of that consultancy, “Inflation in 2021 would close around 45%. This corresponds to exchange-rate pressures that will reappear in the previous election, rate increases that will not be postponed at the end of the year, and joint negotiations that will be more dynamic than last year. This, in a critical health context but which, unlike 2020, would not be accompanied by strong restrictions on circulation and activity, “he said.
Federico Furiase, economist at the Eco Go consultancy, foresees for January, a rise close to 3.5%, “Taking into account that food has an accumulated increase in the first two weeks of January, of 2.8%”, commented the analyst. And on the general situation of the variable that the Government needs to calm down, he adds: “If Banco Centra adjusts the slippage of the official exchange rate to past inflation, with the rate in the subsoil it will be difficult to approach the inflation of 30% of the Budget 2021 when the last quarter of 2020 ended with an annualized rate of inflation of 54% ”, he says.
High frequency inflation
Luciano Cohan, Director of the consulting firm Seido maintains, based on Alphacast data, that January inflation “is better than in December: closer to 3% than 4% because the first two weeks were relatively calm,” he says.
“January did not start badly but food and beverages have a carryover from December,” he says. Regarding the potential impact of the rise of the bread, Already announced by the Argentine Federation of the Bread and Related Industry, Cohan points out: “We have not yet seen the rise in the prices of flour in the gondolas as is being talked about … but if bread increased between 10 and 15%, that it would impact half a point or a little more in the baked goods “, he explains.
On the evolution of food prices, also the measurements of the consulting firm LCG, show that this item presented an average monthly inflation of 4.4% in the last 4 weeks and also 5.4% measured end to end (the second week of January versus the second week of December). And he specified that these price levels leave a drag for the rest of January of 4%.