Inflation slowed to 3.3% in May, lowest monthly rate of year so far

Consumer prices have risen 21.5% in first five months of the year, and by 48.8% over the last 12 months.

Inflation in Argentina totalled 3.3 percent in May, the lowest rate registered since last December, the INDEC national statistics bureau said Wednesday.

The figure, which was below most private estimates of between 3.5 and 4 percent, indicates that price increases slowed somewhat last month. Analysts put that down to the seasonal fluctuations and the government’s introduction of a short nine-day lockdown to tackle the coronavirus pandemic.

Nevertheless, INDEC’S data showed that consumer prices have now risen 21.5 percent in just the first five months of the year, and by 48.8 percent over the last 12 months. It underlines that the government’s annual goal of 29 percent, as outlined in its 2021 Budget, is all but out of reach with seven months of the year still to come.

May’s price rises were led by large increases in transportation (up six percent) and healthcare (up 4.8 percent). Food and non-alcoholic beverages rose 3.1 percent.

The lowest increases were seen in communications (up one percent) and alcoholic beverages and tobacco (up 1.6 percent).

Speaking earlier on Wednesday at a business forum, Economy Minister Martín Guzmán maintained that “the conditions are in place for inflation to be reduced month-by-month,” though he admitted “there may be some seasonal fluctuation.”

“I had said [previously] that March was going to be the highest month [for inflation] and that happened. April was lower and in May, it will be lower than in April,” he argued.

“We have to continue because we are at levels above what we consider to be macro-economically feasible,” he warned.

The most recent Central Bank survey of private economists forecast an annual rate of 48.3 percent. Prices rose by 4.1 percent in April, and by 4.8 percent in March.

Ecolatina said Thursday that it expects prices to rise by a total of 47 percent this year and by at least 40 percent in 2022.

However, the consultancy firm predicted that Argentina could see “the beginning of a slowdown” post-june, “combined with a very slow depreciation of the official exchange rate and a brake on authorisations for increases of select regulated prices.”

“Taking into account that inflation would accumulate a rise of around 25 percent in the first half [of the year], price rises should average around 2.7 percent between July and December to reach our annual projection of 47% … which could be achieved using the exchange rate and tariffs as an anchor, at the cost of postponing adjustments for next year,” said said Ecolatina.

“For this reason, it is difficult for inflation to be below 40 percent in 2022,” the firm concluded.

Argentina’s economy has been in recession since 2018 and the Covid-19 pandemic and accompanying lockdown prompted a decline in GDP of 9.9 percent last year.

Last year inflation totalled 36.1 percent, a sharp decline on the previous year’s rate of 53.8 percent.