MercoPress. South Atlantic News Agency

November inflation in Uruguay remains unchanged: annual target 5.9%

Economists say that the strong peso is helping to make imported goods cheaper

Uruguayan consumer prices in November remained virtually unchanged with a 0.06% increase over October, having accumulated in the last twelve months 6.39% and 5.41% in the eleven months of 2009, according to the latest data released by the Statistics Office.

November was the lowest increase in 2009 and completes three months running of falling inflation. Food and beverage prices remained stable (0%) while Housing and Personnel effects increased 0.27% and 0.82%. respectively. In the Housing item, rent and municipal taxes were up 1% and 0.2%.

So far this year Personnel effects (16.1%); Education (12%); Housing (10.7%) and Health care (7.2%) were the items with the highest variations followed by Food and Beverage, 3.7%.

The Central Bank 12 month inflation target is 3 to7%, but most experts believe it will be in the range of 5.9%. For this to happen December consumer prices should not increase beyond 0.47%. In December 2008, consumer inflation was 0.93%.

However, most experts also agree that an important component of this year’s relatively low inflation for Uruguayan standards can be attributed to the strong appreciation of the Uruguayan peso against the US dollar, (in the range of 10%) which has a direct impact on (cheaper) imported goods and power costs for energy dependent Uruguay.

Uruguay’s University School of Economics estimates a basic basket of goods and services in the range of 24.665 pesos (equivalent to 1,250 US dollars) for a family of four. Consumer inflation in the lower income groups of Uruguay (mainly food, government provided utilities and fuel) was estimated by the Economics School in 7.61% in the last twelve months and 6.54% so far this year.

Official statistics also show that unemployment dropped to 6.4% of the active population during October, although employment overall did not increase. The October index represents 0.9 percentage points drop from September.

However since overall employment remained stagnant (down to 58.7% from 59%) this means the lower index can only be attributed to less people looking for jobs. This was confirmed since the activity rate dropped one point in October and now stands at 62.8%.

Unemployment in Montevideo was 6.6% and 6.2% in the rest of the country. By gender men’s rate dropped from 6.5% to 4.6% between September and October which also helps to explain the overall percentages.