Andrés Randazzo 
June’s monthly inflation fell by 1.8 percentage points to 6%, below market expectations. However, the consumer price index rose by 50.7% in the first half of 2023 and 115.6% in the twelve months to June, according to the National Institute for Statistics and Census (INDEC, by its Spanish initials).
According to several consultants’ early assessments, July is expected to trend upwards. Increases to regulated prices will come into play, although food prices — which have the greatest impact on the index — are still growing by less than in previous months.
“In these past two weeks of July, food price inflation continued downward (an average 5% in the last four weeks) but with a high proportion of products on the rise,” explained sources from the consultancy LCG.
“June is usually a month favored by seasonal effects. Also, this time there were no noticeable adjustments to utilities, and the Central Bank (BCRA) validated an official crawling peg that was lower than previous months,” they continued, referring to the government’s administered exchange rate policy.
“Apart from recent months’ deceleration, which is similar to that of late last year, which then reversed course in just a few months, we don’t believe the trend is going to change this year. The economy is still closed. Expectations of a new administration and future changes in relative prices will continue to keep inflation rates high. The drop in aggregate demand may put a stop to it, but it will do so over high inertia,” said sources from LCG.
Analysts from C&T consultors said that “data from the early days of July put inflation above 7% in a month when tourism plays a bigger role, and there are higher increases in regulated prices (private healthcare, schools)”.
“Food and beverages are rising below 6% in July,” said sources from the company, which measured a consumer price index variation of 6.7% in the Greater Buenos Aires area in June.
Meanwhile, at Centro de Economía Política (CEPA), analysts mentioned hikes in utility tariffs (which, in the case of power, were between 11% and 36%), healthcare providers, transport, gas and highway tolls, as well as increases in internet, phone and cable TV services, plus education.
Regarding food and beverages, CEPA sources said that “April’s exchange rate tensions, which were intended to force a devaluation and had an impact on prices, were not repeated in May nor June. However, the ‘dryland’ scenario of dollar shortage caused by the drought is ongoing. Additionally, the International Monetary Fund’s pressure to adjust the exchange rate also conditions the evolution of prices.”
Analysis
“In the short term, it looks like prices will be closer to 7% than the [8.4%] peak we saw in April, but it’s still a year with high and persistent inflation,” said an analyst from ACM consultancy. “It will be essential to see if the current dynamic of food and beverage prices will hold in the coming months. Right now, the surveyed month seems to set the lower limit for the rest of the year, since a rise in regulated prices is expected in July, including public transport, gas and healthcare providers.”
“Although the June data brings relief compared with recent price evolution, there is still a second half of the year dominated by the elections, which can complicate the exchange rate issue and worsen inflation expectations if there is any unexpected ‘noise’,” they highlighted.
Research economist Martin Calveira of the IAE Business School said that although June “decelerated compared with levels recorded since March, it is still a high monthly number.”
“A similar level is expected for the second semester,” he said. “Market expectations set the lowest base at 7%, although new impulses could happen if there is a broader exchange rate correction after the primary elections (PASO).”
