MercoPress. South Atlantic News Agency

Argentina's inflation in June 0.5% and 4.9% in six months

Argentina's Consumer price index in June reached 0.5%, with an accumulated six months 4.9% and below the Kirchner administration annualized 10% target, according to the latest release from the Statistics and Census Office.

The June 2006 index of 0.5%, a repeat of May, is a positive advance compared to the 0.9% of a year ago, and 0.2% less than forecasted, but still risky since inflation in the last twelve months (July 05/June 06) was 11%.

Even when beef, a staple for Argentina dropped 1.4% in June, overall food prices increased 0.5%; house rents 1.2%; furniture, 2.1%; hygiene products 0.9% and clothing 0.2%.

However the basic basket of food and beverage which is used to define the population indigence line remained unchanged in June, following an accumulated drop of 2.2% in the previous months. According to this official Argentine government estimate, an average family (father, mother and two children) needs 391 pesos (130 US dollars) to satisfy basic food needs.

June wholesale prices climbed 0.8% in June, totalling 5% in the first six months of 2006. Items that experienced falling prices are farm produce 2.2%; fisheries 7.6% while manufactured goods increased 1% and electricity bills 2.5%.

The Buenos Aires press reports that according to Kirchner administration sources, the 0.5% June increase shows that "the business sector is honouring its self regulated price commitments", although there have been some "surprise" increases in restaurants (2.3%) and other leisure activities, which "will be closely scrutinized in July".

The Building cost index jumped 1.6% in June accumulating 10% in the first half of 2006, pushed by the prices of materials (1%) and labour costs (2.3%).

Market analysts described June's performance as positive, however they point out that the task ahead is "not easy", since statistically June is a "neutral month because there are no significant seasonal factors influencing prices".

"Anyhow it's encouraging that annual inflation will be in the range of one digit", said economist Florencia Arcieri.

Another economist Pablo Rojo underlined that the official policy of specific price agreements is working, "businessmen are complying, but the big question is what will happen in the coming months when the latest costs must be absorbed by the different companies".

Camilo Tiscornia points out to the importance of beef in the last two months readings of 0.5%. "The drop in beef prices was crucial which is showing how significant this item is for the cost of living. However this situation can't last indefinitively".