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September monthly inflation confirmed the downward projections and stood at 3.5%as confirmed this Thursday by Indec. It is the first time that it is below 4% in Javier Milei’s management. In fact, It is the lowest monthly inflation data since November 2021: that month, the CPI had shown an increase of 2.5%.
In this way, the increase in the cost of living accumulates an increase of 101.6% in the first nine months of 2024, and stands at 209% in the interannual measurement.
The figure that was known this Thursday contains reasons to celebrate on the part of the Government. Although the price increase entered a downward ladder after the explosive last December, was parked at values that did not fall below 4% in the last four months. Until now.
The Indec headquarters, in downtown Buenos AiresRodrigo Nespolo
Within inflation, The food and beverage segment stood out with a monthly slowdown (2.3%). It is the main component of the basket measured by Indec, and it moved at a pace close to the rise in the exchange rate, in a context of financial stability and a fall in the prices of parallel dollars.
The most significant adjustment occurred in the housing, water, electricity, gas and other fuels segment, with an increase of 7.3% in the month. According to Indec, This movement is explained by the increase in rents and electricity and water rates.. Other items with significant increases were clothing and footwear (6%), education (4,3%) y restaurants and hotels (3,7%).
There was also a significant drop in core inflation. This measurement, which excludes seasonal prices (2.9%) and regulated prices (4.5%), stood at 3.3% in September, after having stood at 4.1% in August.
“Inflation is going down, but it is taking longer to go down than the Government said. He is encountering different resistances on his way. In this case, what was seen is that goods did not slow down (3.2% in the month, compared to 3.3% the previous month), even with the lowering of the PAIS tax rate on imports. We had warned that perhaps it could go to rebuild margins, and there was something of that,” explained economist Gabriel Caamaño, owner of Outlier.
“The slowdown was more on the services side, where there was an important seasonal component that had already been seen in the CABA data. The plus point is that inflation continues to fall, despite the fact that there is no fall in the goods segment,” added the analyst.
The slowdown in the monthly inflation rate had been anticipated by measurements by private consulting firms. According to the Market Expectations Report (REM) that was released at the beginning of this month by the Central Bank, The consensus of the projections is around 3.5% monthly.
That is the same figure that Equilibra, the firm they founded, had estimated. Martin Rapetti y Diego Bossioand the consulting firm C&T Asesores Economicos, led by Camilo Tiscornia and María Castiglioni. For BBVA Research, which uses model numbers in its machine learningthe figure for the month was around 3.9% (with an interval of +/- 0.2%).
The first official data, however, had measured somewhat higher inflation. This was the case of the Consumer Price Index of the City of Buenos Aires, which stood at 4%. And although it registered a drop of 0.2 tenths compared to August (it had given 4.2%), to reach the monthly inflation value lowest so far this yearthe number had been above the projections of the Government and private analysts.
The president of Argentina, Javier Milei, poses for a photo after ringing the opening bell of the session at the New York Stock Exchange, Monday, September 23, 2024. (AP Photo/Seth Wenig)Seth Wenig – AP
The measurement by Idecba, the Buenos Aires statistical entity, also reflected a slowdown in the food and beverage sector (it became more expensive by 2.2% on average, almost in line with the movement of the official exchange rate and favored by the reduction in the PAIS tax rate for imports). But there were sensible adjustments in other categories, such as housing, water, electricity, gas and other fuels (influenced by the increase in expenses, rents and the value of public service rates), Transportation (fuel movements and the value of the bus ticket in the city), Health (prepaid medicine plans and medications) and Restaurants and hotels.
Unlike the Indec basket, In Buenos Aires inflation, services have greater preponderance, that in recent months show greater increases than goods. That is one of the factors that also explains why CABA’s CPI has been a few figures above the Indec data in recent months.
Going forward, however, the price scenario looks challenging for the Government, whose expectations include an expected even greater drop in inflation. In fact, President Javier Milei stated that one of the preconditions for dismantling the exchange rate trap is that “the inflation rate of the macroeconomic program is zero.” This projection, however, removes from the movement of the monthly CPI the “inflation induced” by the movement of the exchange rate (it follows a crawling peg 2%) and international inflation. That is, the Government expects that monthly inflation will converge with these last two variables.
For local analysts, however, the CPI will not be at 2.5% in the short term. According to what was proposed by the consulting firms and banks surveyed in the REM, inflation would remain between 3.3% and 3.6% monthly at a general level (or from 3.1% to 3.4% in its core version) until the end of the year, and would close 2024 with an accumulation of 123.6%.
“The price survey data for the GBA So far in October they show moderation, helped by fewer adjustments in public services and the declines in some foods (vegetables) and drinks (alcoholic).. In this way, the four-week average inflation approached 3%”, they pointed out from C&T Economic Advisors.
With this inflation number, and despite the slowdown compared to the previous month, the Government narrowed the possibilities of reaching its price increase pattern for 2024. If the numbers raised in the 2025 Budget sent to Congress are taken, The Ministry of Economy estimated that in 2024 the CPI will close with a cumulative 104.4%. To reach that figure, inflation would have to average 0.5% per month during the last quarter.
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