MercoPress. South Atlantic News Agency

November shatters Argentina's 2005 inflation target

Argentina's consumer prices index surged 1,2% in November reaching 11,1% pushed mainly by increases in food, clothing and health services. Inflation in the last twelve months stands at 12%.

This compares negatively with November 2004 when the consumer prices index remained unchanged and November 2003 with 0,4%. Actually leaving aside the peak of the 2002 crisis year, 2005 could prove the highest inflation since 1992 with 17,2%.

The 11,1% index shatters the government's 2005 target of 11% and economists consider highly uncertain that the Kirchner administration can manage to deflate December.

November marks the third highest increase in the year behind January and March with 1,5%. Even more worrisome and according to data from the Statistics and Census Office, the basic food basket in November ballooned 3,3% accumulating 15% in the first eleven months with the cost rising to 385 Argentine pesos (approx 128 US dollars).

This is the minimum sum a family with two children need monthly before being catalogued as indigent. The total basic basket, which also includes services and is used to define the line of poverty for a family of four, currently stands at 817 pesos (approx 272 US dollars).

The food and beverage increase 2,1%, plus clothing 1,4% had significant impact in the November index although the abundance of seasonal fruit and vegetables helped to ease the surge.

However services, with 1%, kept pressing on the index, particularly pre-paid medicine and health costs, as well as education (1%), taxis and cable television rates. Other increases: leisure 1%; rent 1,2%; housing and basic services 0,5%; household equipment and home maintenance 0,4%.

In the last eleven months education jumped 16%; clothing 12,6%; food and beverage 14,8%; housing and basic home services 14,4%.

Economists forecast that December will experience a strong drag effect from November, probably 0,5%, in spite of the recent understanding between supermarkets and the government to lower the price of some 250 products a maximum 15%.

But statistics from recent months show that beef and dairy produce prices are hard to contain: meats in general rose 4,5% in November.

"If prices understandings worked, we'd have no inflation. But as long as the government persists with the current monetary and exchange policy, with the Central Bank issuing pesos to keep an exchange rate favourable for exporters, it will be hard to attack the problem of inflation", said economist Aldo Abram who forecasts a 1% December inflation, which means annual inflation in the range of 12%.

Wholesale prices in November recorded a 0,1% rise and 9,7% in the first eleven months of 2005. Construction prices rose 0,7% in November accumulating 16,9% in eleven months.