Inflation in Argentina during the current month of August could drop to 0.7% because of the Supreme Court’s decision to strike down the hikes in natural gas prices for residential users, according to the official stats office Indec. Similar stats also indicate a strong contraction of the Argentine economy.
As part of the prices surveyed to measure the inflation rate, Indec will start using the cheaper natural gas rates instead of the new tariff scheme, which had been implemented by government, revealed Indec chief Jorge Todesca.
The administration of president Mauricio Macri imposed significant increases on gas and electricity prices (400% to 500%) to recover bottom rock rates which demand hundreds of millions of dollars in subsidies, a legacy from the populist ex president Cristina Fernandez. But on appeal the Argentine Supreme Court cancelled the increases for not having carried out a public hearing.
Despite the gas prices ruling Todesca acknowledged that all indices measured by the bureau show “an across-the-board drop” during August.
Consumer prices rose 2% in June, according to Indec, the third following an overhaul of Argentina's economic statistics. Prices had risen 3.1% in June and 4.2% in May, with annual figures still not available. However private estimates, year to year, are in the range of 40%.
Todesca said the economic indices surveyed by Indec show an “across-the-board drop,” focused mainly on the industrial and construction sector. Nevertheless, he said there’s a “reasonable expectation for the scenario to improve,” claiming that, for example, construction permits requests are growing.
Indec posted two weeks ago an empirical estimate on the level of unemployment, reporting a 9.3% figure for the second quarter of the year. Todesca questioned the previous unemployment reports issued during the Cristina Fernández administration, claiming they were “inadequate” and that the figures reported lower than the real ones.
Back in 2007, the year in which the bureau was first subject to manipulation and career statisticians began quitting or denouncing threats and government meddling, unemployment stood at 8.5% in the second quarter, significantly down from the heights of the 2001-2002 crisis in which figures breached the 20% mark.
Other Indec stats help to understand the across the board drop of prices in August, closely linked to a strong contraction of the economy. In effect last week was published the Monthly Economic Activity Estimator (EMAE), which usually correlates closely with Argentina's GDP figures published at a later date and results showed that recession is accelerating, with the latest month showing the biggest contraction by far: June ended with a 4.3% decline in terms of economic activity in the yearly comparison.
In the previous two months, the drop had been roughly half that figure, as both April and May ended with a 2.1% contraction according to Indec.
However the Argentine economy in the first three months of the year did slightly better, with growth of half a percentage point on average in January, February and March (up by 0.3%, 1% and 0.4% respectively). This means that, in the first half of the year, the Argentine economy fell by 1.3% according to EMAE’s estimate.