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Analysts are revising October inflation downwards and some see the possibility of breaking 3% closer - Infobae
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Los analistas revisan a la baja la inflación de octubre y algunos ven más cerca la posibilidad de perforar el 3%
El proceso de desinflación es muy marcado en alimentos y bebidas. También ayuda la baja de los dólares financieros y de la brecha cambiaria. El nivel de actividad, sin embargo, no termina de repuntar
www.infobae.com
October 16, 2024
The disinflation process is very marked in food and beverages. The drop in financial dollars and the exchange rate gap also help. The level of activity, however, has not yet recovered.
By Pablo Wende
The market is concerned that Argentina's economy will become more expensive in dollars very quickly throughout 2024 (Sarah Pabst/Bloomberg)
Barring any major surprises in the next two weeks, all indications are that inflation will fall another notch in October, continuing its downward trend. After 3.5% in September, private sector projections indicate that the index could approach 3% this month, in another signal of significant importance to the Government.
“For October we expect a new decrease in monthly inflation that would be in the range of 3.1% - 3.3%. Although there are increases in regulated prices (3% electricity, 5% water, 16.5% subway), this will be partially offset by the 1% decrease in fuels,” said a report by Eseade , under the direction of Iván Cachanosky .
The economist Fernando Marull indicated the same in his latest report to clients . “The latest data show that the economy in September continues to recover; slowly, but steadily, and we expect it to continue like this. Inflation fell to 3.5% but remains high; we expect close to 3.1% for October .”
The description of this additional disinflation process that the economy would have is practically identical: “The core would remain stable, similar to September, due to the decrease in Regulated items that are already more “normalized” with an expected increase of only 2.7%. Gasoline falls 1%, there is no increase in bus fares in AMBA, electricity and gas increase very little and only prepaid and telephone services continue with increases above 5%.
But some are even more aggressive in their estimates. Ramiro Castiñeira , director of Econométrico, estimated that the index could even break 3% this month. “Our calculations indicate that it could reach 2.9%, because there was a significant slowdown in food and beverages.” In September, this sector had already shown an increase of only 2.3%, which is far below the general index.
The continuation of the disinflation process would also be good news for the foreign exchange market , as it means less pressure on the official exchange rate. The market's concern is that the Argentine economy will become more expensive very quickly when measured in dollars throughout 2024.
The explanation is that prices rose much faster than the official dollar rate. As the inflation index converges with the exchange rate adjustment of the official exchange rate (which maintains a “ crawling peg ” of 2% per month), this situation that makes exports less competitive and at the same time makes imports cheaper would no longer occur.
Inflation data for September, according to INDEC
In addition to closely following what ultimately happens in October, attention is also focused on November. This is a month with a low level of seasonality for prices, with no expected increases due to weather reasons, for example. Therefore, it should not be ruled out that next month will produce inflation data that more decisively breaks through that 3% floor.
Wholesale inflation in August had already been close to 2% and the September inflation rate will be announced shortly. As companies are under less cost pressure, it is expected that this decrease will be passed on to the final consumer, especially in a context of difficulties in increasing sales .
While inflation is consolidating its decline, the level of activity has not yet managed to fully recover. “More high-frequency data show a mixed month very similar to August, with positive demand data (CAME sales, credits, car registrations) due to the recovery of income, strong improvement in foreign trade with Brazil, stable car production, and then negative collection and Construya index. We expect a slight rebound in October,” FMyA said.
The fall in financial dollars and the exchange rate gap in recent weeks also plays a role in this process of reducing inflation, especially in the services sector, which tends to compare income measured in dollars in relation to what happens in other parts of the world. For goods, however, it is more important that any change in the official dollar be as gradual as possible to avoid an almost immediate transfer to prices.
