Argentina’s inflation surpassed Venezuela’s in July

Inflation in Argentina exceeded that of Venezuela in July, which stood at 5.3%, according to an independent measurement of Nicolás Maduro’s government.

Last month’s price increase in Venezuela slowed down by 9.2 percentage points compared to June, according to the Venezuelan Finance Observatory (OVF), an independent organization comprised of economic experts.

Thus, the accumulated inflation in the year’s first seven months was 62%, while the inter-annual rate (July 2021-July 2022) stood at 139 %, according to OVF figures. Thus, according to the observatory’s data, July’s inflation rate is the fourth lowest this year.

According to an independent measurement, Venezuela’s inflation was 5.3% in July, compared to the 7.5% estimated by consulting firms for Argentina.

In January, the average increase in prices of goods and services was 4.8%; in February, 1.7%; in March, 10.5%; in April, 3.6%; in May, 10.1%; and in June, 14.5%, the highest so far in 2022.

The OVF underlined that the sectors that registered the highest increases last month were food and non-alcoholic beverages, with 9.9%, and alcoholic beverages and tobacco, with an increase of 9.4%.

On the other hand, the OVF indicated that, in July, the cost of the basic food basket -analyzed for a family of five people- was US$392, which represents an increase of 29% compared to July of last year, when it was US$303, according to EFE agency.

The Venezuelan Central Bank (BCV), the official institution that must report inflation records, has not yet published the data for July or June; Maduro’s government has already had controversies with the international community over the quality and pace of disclosure of price data.

In this sense, the last number released by the Central Bank corresponded to May, when the increase in the prices of services and products was 6.5%, bringing the accumulated inflation in the first five months to 23.9%.

It should be noted that Venezuela emerged last December from the hyperinflation it entered in 2017. For four years, it reduced the bolivar’s value, which led society to unofficially adopt the dollar to preserve its income.

THE OUTLOOK FOR ARGENTINA

On Thursday, August 11, Indec will publish the official inflation figure for July, which, on average, for private consulting firms stood at 7.5% -the Indec would have recorded a slightly lower figure pushed down by the price of meat- according to the survey of market expectations collected by the Argentine Central Bank, which projected a 90% price increase for 2022 in its last report, as compared to the 76% it had estimated a month before. Some consulting firms, such as FIEL, foresee that the rate will reach three digits next December.

ECO GO reported that its price survey reached 6.8% last month, 44.5% since January, and 69% in the last year, while C&T’s retail price survey showed a monthly increase of 7.6%, “the highest since April 2002, immediately after the end of convertibility; It even surpassed the 7.2% that we had surveyed in April 2016, when the Macri administration implemented strong adjustments in public services, although that data is not in the official series because the CPI estimation had not yet restarted”.

Similarly, the CCD of the UMET reported that inflation for “registered salaried workers was 7.3% in July, accelerating 1.8 percentage points compared to June’s records. It is the highest monthly inflation since April 2002, exceeding 10%. Thus, in the first seven months of the year, inflation accumulated 47%.”

“In the last 12 months, the interannual increase reached 70.8%. In both cases, these are the highest records since 1991. For inflation in 2022 not to exceed 80%, monthly inflation should not exceed 4.1%. Meanwhile, if inflation were 5% per month for the remainder of the year, 2022 would end with cumulative inflation of 87.6%. If it were 5.5% monthly, it would end at 92%,” he said.

“The political and economic uncertainty framework explains the strong inflationary acceleration in July after the ministerial changes in the economic-productive portfolio in June and July. The financial dollar (cash with liquidation) went from ARS 209 per dollar at the end of May to ARS 252 per dollar at the end of June, to touching ARS 350 at the worst moment of July. With the new cabinet reshuffle, the financial dollar closed July at around $285 per dollar”, concluded the UMET.

With July’s figure, inflation will have accumulated 45% since January and almost 70% in the last 12 months. July’s result will be the highest monthly index of the year after the 6.7% recorded in March and the highest since 1991, when the convertibility plan was implemented, eliminating inflation for ten years.

After the 5.3% reported by Indec for June, when it rose to 64% for the last 12 months, for private sector economists, the government’s chances of achieving the fiscal adjustment of 8% of real expenditure in the second half of the year -committed with the International Monetary Fund (IMF)-, will reflect its possibilities of containing pressures upward; the first half of the year, with a slow devaluation of the peso, measured by the variation of the official exchange rate and no tariff hikes, was already very complex due to the fiscal deficit exceeding the equivalent of 4% of GDP and the strong monetary issuance.

After the CPI of 5.3% in June and 64% in one year reported by Indec, private analysts estimated that inflation would reach 90% in December, although some consulting firms already anticipate a 3-digit figure.

In this sense, the Minister of Economy Sergio Massa already anticipated in his first press conference that the data for the next two months would be the hardest for the government, even though he was confident that the measures announced to start reducing the fiscal deficit and to comply with the target of 2.5% of the GDP agreed with the IMF will allow a gradual reduction of the unleashed rise in prices.

THE INTERNATIONAL OUTLOOK

With the June data, Argentina ranked seventh after six months of 2022, with 64% accumulated in the last year, after Lebanon (211%), Sudan (199%), Venezuela (170%), Syria (139%), Zimbabwe (131%) and Turkey (78%). Thus, it surpassed the price increases of several African countries: Ethiopia (34.5%), Angola (23.9%), Sierra Leone (17.3%), Nigeria (16.1%), and Zambia (15.7%).

Among the G7 countries, the United States reached a record 9.1% year-on-year in June – its highest level since 1981 – Britain also 9.1%; Italy 8%; Germany 7.6%; Canada 7.7%; France 5.8%; and Japan 2.5%.

In Asia, Sri Lanka, plagued by severe socioeconomic and political conflict, reached 45.3%. Lebanon still leads the world ranking with 211%, Sudan with 199%, and Venezuela with 170%.

In Latin America, except for Venezuela, which has left behind its hyperinflation but maintains a three-digit rate in annual terms, the main countries in the region recorded an average increase of 0.7% last month. After Argentina in June was Peru with 1.1%, which accumulated 4.6% in the semester and 8.8% in the last year.

With information from Infobae