MercoPress. South Atlantic News Agency

Ten month retail inflation in Uruguay reaches 7.98%

Enrique Rubio head of the Planning and Budget Office

Lower prices for food and beverage were not enough to impede Uruguay's October consumer price index from increasing 0.33% pushed by a stronger US dollar and weaker local currency.

Accumulated consumer inflation so far this year has reached 7.98%, which means that to keep it below two digits (which triggers a round of labour negotiations) prices in the last two months of 2008 must be below 1.87%. Local analysts expressed concern about inflation in Uruguay. Pablo Rosselli from Deloitte said that underlying inflation (minus fresh fruit and vegetables and public utility rates) remains in the range of 1% which is "too high", evidence of persisting short term pressures on prices. In October 2007 the CPI was minus 0.23% and in 2006, minus 0.2%. Pablo Moya from Consultants Oikos said that the fall in fuel prices and food did not compensate sufficiently the increase in the US dollar value in the local money market and company are still reluctant to pass on lower international prices. Enrique Rubio head of the Planning and Budget Office said that "we've seen that the drop in international prices in certain goods is not reflecting yet, in retail prices. Such is the case with wheat so we have programmed several meeting with millers and bakeries". In October the items with largest monthly incidence were Leisure and Recreation, 3.3% and Transport and Communications, 1.1%. However, according to Uruguay's School of Economics the index for lower income households, October inflation was actually negative, 0.35%, accumulating 6.84% in the ten month period. The basic food and services basket for this category is estimated in the equivalent of 1.000 USD.