The inflation continues to accelerate and March would have recorded another advance close to 3% monthly. Although it was expected that it would not ease due to the seasonality of the month, with one of the greatest pressures of the year, these are very high levels. So much so, that the price index would have already accumulated a advance close to 9% since January and leaves a high floor for the rest of the year. The good news is that economists hope that the deceleration process will soon resume, although it will partly be conditional on what happens abroad.
While waiting for the official data to be published by Indec on April 14, private economic consultants that carry out their own measurements estimate that the Consumer Price Index (CPI) would have registered a advance of between 2.7% and 3% monthly. That is, a variation very similar to that of the last three months. However, the interannual measurement would have dropped to between 31% and 32%.
Milei’s inflation goal “with zero” in August seems unlikely
Although the consultants agree that once the rate adjustments and the seasonal peak in March have passed, inflation will return to the downward path, Javier Milei’s projection seems less and less feasible: The President reiterated on several occasions that In August of this year inflation could “start with zero”.
That is, in his words, it would register advances of less than 1% per month, such as 0.9% or less. Due to the latest variations and the inertia it exhibits, economists are cautious and consider it a very optimistic projection.
The spike in the international price of oil, due to the war in the Middle East and the fall in global crude oil supply, affects and could continue to affect inflationary dynamics. Until now, the impact has been felt partially in the internal costs of fuels and, indirectly, in the entire chain that arises from transportation, logistics and inputs. It is not the main reason for the acceleration in prices, but it provides a certain amount of upward pressure.
Claudio Caprarulo, director of Analytica, estimates that while the rise in fuel prices played against the inflationary dynamic in March, the positive thing was in the food and beverage category, which would have registered a slowdown compared to the previous month. For the general level, it is estimated that in March the price index would have been at 3% monthlywhich would imply an acceleration of 0.1 percentage points compared to February.
“The fuels increased almost 12% during the monthwith a price transfer of only 50% of what the international price of oil rose. The direct impact of fuels on the CPI was 0.4 points and add others 0.2 points indirectlysince fuel works as an input to the rest of the goods and services,” details Lucio Garay Mendez, chief economist at EcoGo.
When will inflation slow down again in Argentina?
Garay Mendez does not rule out that the reduction in global energy supply, due to the paralysis of maritime traffic in the Strait of Hormuz due to the war in the Middle East, could extend for several more weeks and keep the international price of oil high, which would continue to put upward pressure on fuel prices. Therefore, it is estimated that the general level of the CPI in April and May, although it would decelerate, would probably would be above 2% monthly.
Camilo Tiscornia, director of C&T, estimates that the CPI for April “will give much less than in March, unless something crazy happens with gasoline.” Caprarulo agrees with this, and also estimates an inflationary slowdown in April, although “the big question remains the price of oil.” For the period between April and June, the director of Analytica projects a inflation around 2.6% monthly average.
“For April, we project a deceleration of inflation to 2.4% monthlyafter the 3% estimated for March. Inflation will remain high for the drag left by March (+10%)but it would weaken due to the drop in meat prices. In fact, if meat falls further, the slowdown could be even more pronounced. Furthermore, with the price of oil at US$101the gasoline continues with a 8% delay. If corrected during April, it could add 0.2 additional points of inflation,” adds the consulting firm FMyA.
According to Max Capital, the market expects the international price of oil to remain above last year’s levels, even if the conflict in the Middle East stops. Higher oil prices, he highlights, have implications for both inflation and external accounts, since it represents a “double edge shock” for an energy exporting country that seeks to reduce inflation and at the same time needs to accumulate reserves.
“The inflationary implications are similar to those of other countries, although the lack of a strong nominal anchor from the monetary side and greater inflationary inertia could generate a more pronounced impact. On the external side, however, part of the effect could be offset by a stronger currency thanks to higher mining and oil prices, along with a good agricultural harvest, Foreign Direct Investment (FDI) flows and debt issues also directed at these sectors,” he adds.
The broker maintains that the general effect of these dynamics would be:
- A slightly higher inflation
- A faster accumulation of international reserves
- A more appreciated currency in real terms
From a structural point of view, he highlights, “the shock reinforces recent dynamics, which favors energy and mining, sectors that are growing at a faster rate, but affects industrial production” due to the less competitiveness which implies a lower exchange rate in real terms.
