Inflation slowed to 1.5% in April amid nationwide lockdown

Argentina's monthly inflation rate fell to a 29-month low in April as the nationwide lockdown to halt the spread of the coronavirus lockdown brought economic activity to a standstill.

Consumer prices rose 1.5 percent in April compared to March, a significant decrease from the previous monthly figure of 3.3 percent, the INDEC national statistics agency reported. A year ago, inflation was 45.6 percent, it slowed down despite the government's economic stimulus measures that have significantly boosted the amount of money in the financial system since the quarantine began. 

President Alberto Fernández implemented a quarantine across the country on March 20, which is still ongoing (due to expire on May 24, but it may still be extended), making April the only month so far that reflects its full economic impact. Economic activity collapsed last month .

The quarantine also affected the way INDEC collected data, the agency said. The bureau was only able to conduct telephone, email, and online surveys, rather than traditional in-person interviews. It is unclear how much the change in methodology impacted the data. For items such as clothing and footwear and restaurants and hotels, only those that were open to the public or operating online were surveyed, INDEC said.

Another key factor affecting the data is that the Fernández government has frozen the price of public services such as gas and electricity. It also stopped price increases on 2,300 products it considers essential, impacting food prices, among others, through the Precios Cuidados price-controls scheme. Nonetheless, the figure was the lowest monthly inflation rate recorded in Argentina since November 2017.

The largest increases in prices in April were registered in food and alcoholic beverages sector (up 3.2 percent), one of the few sectors that remained working.  According to INDEC, "increases were observed in items with a high seasonal component such as fruits and vegetables, tubers and legumes, but there were also increases in meat and derivatives; sugar, sweets, chocolate, sweets."

Education registered a drop in April (minus 1.5 percent) as a result of the reduction in fees from educational institutions, though the sector has still registered he highest accumulated increases over the past year (up 20 percent), according to official data.

The greatest decline was registered in communications, as mobile phone and fixed line fees were lowered in April. 

In 2019, inflation in Argentina totalled 53.8 percent, one of the highest in the world. The economy, which has been in recession for two years, recorded a contraction in GDP of 2.1 percent this year.

The government estimates that, due to the impact of the Covid-19 pandemic, GDP could fall by as much as 6.5 percent this year.

– TIMES/AFP/BLOOMBERG