MercoPress. South Atlantic News Agency

Inflation guess game in Argentina: anywhere from 0.3% to 1.8%

Argentina's April inflation rate reached 0.3% and 5.7% in the last twelve months according to the latest release from the National Statistics Institute, Indec. The wholesale or production prices for the month was 0.5% and 1.7% since January, while the Construction Cost index rose 0.4% and 1%.

But almost all private sector economists consider Indec data inaccurate and accuse the institute of intentionally manipulating economic data, although the government has repeatedly denied this. The think-tank Ecolatina had anticipated that April inflation would be in the range of 1.8%.

“Although inflation continues to decline in annualized terms, there hasn't been such an elevated monthly increase since August, 2008,” said Ecolatina in a report published Sunday. “The high increase is the result of significant increases in clothing, education, healthcare, food and drinks, cigarettes and fuel.”

Clothing and educational prices likely rose mainly for seasonal reasons, Ecolatina said. Kids went back to school. Meanwhile, healthcare costs and cigarette prices rose after these sectors signed new agreements with the government. Furthermore the de-freezing of public utilities rates also had an impact.

“Inflation is slowing down because of the crisis but it continues to be high,” said Mariano Lamothe, an economist at the think tank Abeceb.

Economists say April's real month-on-month figure was probably 1.4%, though estimates ranged from 1.2% to 1.8%. Graciela Bevacqua, a former director of Indec, removed for not appeasing Executive “suggestions”, and a team from the Statistics Department from the Buenos Aires Economics School estimated April inflation at 1.2%.

The real year-on-year number was probably 16.5%, with estimates as low as 16.1% to as high as 19%.

Economists expect inflation to ease, though some note that a depreciating peso could push inflation higher if the exchange rate is changed rapidly.

“The exchange rate plays a key role in determining inflation at the end of the year,” said Esteban Medrano, an economist at Macrovision. “We're expecting the government to manage the exchange rate to soften the economic slowdown, so inflation won't slow down much. It probably won't fall much below 16%.”

The median forecast for real 2009 inflation was 13.75%.

Ramiro Castineira, an economist at Econometrica, said the trend will be for inflation to decline. “In general terms, strong declines in the economy lead to strong declines in inflation,” Castineira said. ”The economic slowdown will be reflected in inflation”.

With Indec data the so called Basic Total Basket (March), just above the poverty line, means a family of four must make 1.000 Argentine pesos a month (approximately 270 US dollars). The Basic Food Basket (March), which measures the indigence line, has a cost of 444 Argentine pesos equivalent to 120 US dollars.