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ECONOMY | 15-08-2023 16:37

Inflation in Argentina accelerates again with fears of worse to come

Consumer prices rose 6.3% in July and are up 113.4% in the last 12 months; Measurement does not include this week’s devaluation of the official exchange rate, prompting analysts to warn of double-digit hikes in the near future.

Fears of runaway price hikes are again rearing their head in Argentina following the results of a turbulent PASO primary and the release of government data confirming inflation accelerated in July.

Consumer prices rose 6.3 percent last month, data from the INDEC national statistics bureau confirmed on Tuesday, up from six percent the previous month. 

According to government data, inflation totals 113.4 percent over the last 12 months with prices up 60.2 percent in just the first seven months of this year.

However, analysts are already forecasting that price hikes are expected to hit double digits this month and next after Argentina’s government allowed the peso to devalue by more than 20 percent on Monday and hiked Central Bank interest rates.

Lautaro Moschet, an economist at the Fundación Libertad y Progreso, said that a "strong acceleration" is anticipated in August.

"The dollar tax hike at the end of July implied an acceleration in the first days of the month that was mainly reflected in food and non-alcoholic beverages," he said.

“With the [subsequent] 22 percent devaluation [of the peso] at the official wholesale exchange rate, a new dynamic in the evolution of prices began, marking a new momentum.

“As if that were not enough, an increase in regulated prices will also put pressure on August inflation. With this, we expect the next [monthly] figure to be around 9.3 percent," he added.

Some experts are warning that inflation in August and September could total as much as 25 percent cumulatively.

 

July increases

News that prices accelerated again in July is another blow to President Alberto Fernández’s government, which has struggled to tamper down inflation during its time in office. In June shoppers had enjoyed a slight slowdown after the 7.6 percent figure recorded back the preceding month – that was also a drop on the record 8.4 percent recorded in April.

Hikes in July were led by the communications sector at 12.2 percent, which saw the introduction of government-approved rises in telephone and Internet services. Recreation and culture followed at 11.2 percent, led by rising costs of package holidays. Healthcare, along with alcoholic beverages and tobacco, followed at nine percent.

Food and non-alcoholic beverages, so often among the highest categories, rose only 5.8 percent. "Within the division, the rise in bread and cereals and meat and meat derivatives had an impact," said INDEC in its monthly report. 

The areas with the lowest increases were housing and utilities at four percent and clothing and shoes at three percent.

Patagonia and the La Pampa region experienced the highest hikes at 7.8 percent and 6.4 percent respectively, with the northwest at the other end of the scale with 6.1 percent.

Private analysts had forecast a July inflation rate of around seven percent. 

The release of inflation data comes just days after the PASO primaries. Publication of the report was delayed until after the elections had taken place.

 

– TIMES/NA

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