MercoPress. South Atlantic News Agency

Argentina May inflation with “new system”: 0.6%

Argentina's consumer price index in May was 0.6% according to the country's Statistics and Census Institute (Indec) which has began applying a new methodology. This means that in the fives months of 2008 inflation was 4% and 9.1% in the last twelve months.

According to the new index, food and beverage increased 0.1% with beef (Argentine staple) down 4.5%, while bread was up 2.1%, fresh fruit 2.9%, alcoholic beverage 3.1% and dairy and poultry up 1.4%. Education was the item with the strongest hike, 3.7%; clothing, 1.2%; medical assistance 1.2% and transport and communications, 1%. Housing and rent was up 1%. Wholesale prices in May increased 1% totaling 5.2% in the first five months of the year. Construction costs were up 2.3% with an 8.2% accumulation in five months. The new methodology to calculate the consumer price index of goods and services cut the number of items considered from 818 to 440, eliminating such things as overseas travel, domestic service and adapting the system to the "new pattern of consumption" according to the official Indec release. The previous index as well as the workings of Indec became controversial two years ago when inflation began creeping and then President Nestor Kirchner's removed the technical staff and replaced them with political appointments. Indec inflation since then has been below two digits, (a government wish and goal), but the index is considered non reliable to the extent that labor contracts have been agreed in the range of 18 to 30% and expectations are above 30%. In spite of the "magical accounting", financial traders and market analysts estimate Argentine inflation in 2007 was in the range of 18 to22%, but in 2008, at the current rate, should be over 30%. The launching of the new methodology was accompanied by a noisy protest from Indec's union arguing that "the new system is no good if the political intention is to keep lying to the people". They added that "for the last 16 months there has been evident and systematic manipulation of the CPI, even without any formal changes in the methodology applied". "What we are really seeing today is no less than the laundering of the manipulation of consumer prices which began in January 2007" warned Claudio Lozano an economist and member of Congress. However private analysts and economists admitted that in May they expected an easing of inflation (in the range of 0.8%) compared to April, which was the month of the farmers' protest peak which led to some shortages and speculation with retail prices.