Warning sign for Milei as inflation creeps up to monthly 2.5%

Government data delivered a warning to President Javier Milei on Thursday as statisticians revealed that inflation accelerated last month above the expectations of most analysts.

Data from Argentina’s Consumer Price Index (CPI), tracked by the INDEC national statistics bureau, shows that prices increased 2.5 percent in November – 0.2 points above the 2.3 percent recorded in October.

As a result, cumulative inflation over the last 11 months rose to 27.9 percent, with prices up 31.4 percent year-on-year.

While the news will be of concern to the Milei government, the figure was far from unexpected. Inflation has now remained above the two-percent threshold for three consecutive months and accelerated for the last four. 

Most analysts and private consulting firms had forecast a rate of 2.3 percent to 2.5 percent.

Housing, water, electricity, gas and other utilities led November’s increases, rising 3.4 percent. Transport (three percent) and food and non-alcoholic beverages (2.8 percent) were the categories with the highest increases in the penultimate month of the year.

The lowest increases were clothing and footwear at 0.5 percent and household equipment and maintenance, up 1.1 percent last month.

The monthly acceleration was in line with prices in the capital, which climbed 2.4 percent last month, according to City Hall’s IDECBA institute. In the first 11 months of the year, prices in Buenos Aires City increased 28.3 percent, said the agency.

Economists and consultancy firms consulted by the Central Bank’s REM market expectations survey had forecast a rate of between 2.3 percent and 2.5 percent, noting price hikes for food and non-alcoholic beverages, utilities and transport. Annual inflation is now estimated at 30.4 percent.

While the figure is a far cry from the triple-digit annual inflation recorded under the previous government, Milei and his economic team boldly predicted earlier this year that the monthly rate would be one percent by December.

At least two consultancy firms forecast this week that inflation in the last month of the year will be 2.3 percent.

The Equilibra consultancy firm had placed November inflation at 2.5 percent, driven by increases in housing, water, electricity and utilities, transport and communication. It now sees an annual rate of 31 percent.

Another firm, EcoGo, also estimated 2.5 percent, propelled by a three-percent hike in food prices, most notably meat and fruit. “November was a month of normalisation but also of corrections, which helped keep inflation on the rise,” its analysis stressed.

The Fundación Libertad y Progreso Foundation projected November inflation at 2.3 percent, with a year-on-year rate of 31.2% percent. 

With inflation stabilised at close to two percent per month at the end of the year, but showing no sign of a sharper drop, Milei’s economic team is closely watching the evolution of three key variables in December and January: regulated prices, fresh foods (meat and fruit) and transport and energy costs.

– TIMES/NA/PERFIL