When the INDEC national statistics bureau confirmed a March inflation rate of 7.7 percent, industry leaders immediately began recalculating the mark-up they’ll have to apply to products in order to turn a profit in the coming months.
Forecasts all around are not the best: the Unión Industrial Argentina (UIA) believes that consumer prices in 2023 will eventually total between 120 and 140 percent this year, if current macroeconomic variables remain the same.
INDEC’s alarming consumer price index data for last month was led by food increases that continued in the first fortnight of April. New manufacturing costs promise to continue the pressure.
"From the factories' costs we can already see that the rate of mark-ups will be between 120 and 140 percent. Far from being around four percent monthly, the CPI will be hovering between six and seven percent monthly and this will stay until the elections," one of the UIA’s top leadership told Perfil, speaking on the condition of anonymity. The same source clarified that, given the fall in consumption, "it will not be possible to pass all the increases that reach production onto prices."
If this prediction rings true, Economy Minister Sergio Massa’s attempts to keep inflation in double digits annually will have been neutralised by the pressure of repricing.
Business leaders acknowledge that "there was an important political decision by Massa to use his political capital to try to control macroeconomic variables." But some said they have been "disappointed" with the results.
A representative of a hardline sector of the UIA, consulted by this outlet, argued that "few promises have been fulfilled" by the head of the Treasury amid his promise to keep fiscal order.
“There is an adjustment that has disrupted payments to state suppliers, for works that were already contracted, and the paralysis of public works is already having an impact on industrial activity. But, at the same time, we continue with unstoppable spending and money issuance that generate more and more inflation,” said the owner of a large company, speaking anonymously. “This is no good for anyone.”
Estimates and forecasts
Analysts and economists participating in the Central Bank's Relevamiento de Expectativas del Mercado (REM) survey last week revised their inflation expectations for the year upward, forecasting an annual rate of 110 percent. The same forecast, applied from March to March rather than just for the calendar year, would reach around 130 percent.
Economist Fausto Spotorno, who forecasts an annualised rate of 118 percent for Argentina in 2023, believes that these projections will not lead to a larger crisis, as long as there is no abrupt devaluation before the end of Alberto Fernández's government. That is the goal set by the Economy Ministry and Massa himself has made it clear that he would quit his role were a devaluation on the cards.
Estimates are diverse, but always within the realms of stability. Sebastián Menescaldi, the associate director of the EcoGo consultancy firm, told Perfil that their annual projections fluctuate between 122.6 and 147 percent, "as long as a financial disruption is avoided."
"It remains to be seen what the government is going to do with imports in the face of the shortage of foreign currency, which could close further. It also remains to be seen who the candidates will be, and then who will have the best chances. There are many variables that will influence this year's scenario," he said.
Financial analysts as a whole are betting on constant tension on the exchange markets, which could lead to corrections in inflation forecasts. There is a consensus that inflation will cruise at six percent a month for now, with seasonal peaks and the impact of the drought, which will generate a rise in costs due to shortages of products.
"It is still uncertain how much impact the fall in agricultural production will have, due to its effect on the production chain, as well as on consumption," admitted one high-level manufacturing businessman.