MercoPress. South Atlantic News Agency

May's inflation in Argentina was 3.3%: What will happen after the elections?

Economy Minister Guzmán believes “the conditions are in place for inflation to be reduced month by month.”

Argentina's inflation in May was 3.3% for a year-on-year accumulation of 48.8%, the highest mark since March 2020, according to the National Institute of Statistics and Census (INDEC)

Inflation in May stood at 3.3%, the lowest since November last year, and accumulated a rise of 21.5% in the first five months of 2021, INDEC reported, while the accumulated variation in prices concerning the same month of 2020 was 48.8%.

The 3.1% increase in the Food and non-alcoholic beverages division was the one with the highest incidence in most of the regions. But the overall increase was mainly explained by rises in oils, fats and butter; coffee, tea, mate herb and cocoa; meats and derivatives, milk, dairy products, eggs, vegetables, tubers and legumes; and bread and cereals, which were partially offset by the drop in fruits.

The item with the highest percentage increase in the month was Transportation, with 6.0%, mainly driven by increases in the purchase of vehicles and fuel.

Health care rose 4.8% through an increase in pharmaceuticals, health care devices and equipment and medical insurance.

Items least affected by increases were communications (1.0%) and alcoholic beverages and tobacco (1.6%).

The new INDEC figures did have a high impact on the Consumer Price Index (CPI), but lower than that of April. According to official data, food rose 3.1% in the fifth month of the year, when the previous month it had risen 4.3%.

At the same time, there was a significant slowdown in clothing and footwear, which in April had led the price increases with an average rise of 6%, while in May it exhibited a rise of just 2.1%. In previous months this item was crossed by seasonal factors. The drop in the price of fruits and the slowdown in clothing caused seasonal prices to grow only 1.5%, 0.7 percentage points (p.p) less than in the previous INDEC record.

In general terms, inflation in May was largely driven by adjustments in prices regulated by the Government, which grew 3.8% on average, 0.3 pp more than in April. By contrast, core inflation, which does not include regulated prices or seasonal factors, slowed from 4.6% to 3.5%, the lowest percentage in seven months.

However, May's inflation was still deemed high for a country with depressed wages, a low level of activity, lagged rates and a somewhat overvalued currency. And everything is expected to blow up after the elections even despite Economy Minister Martín Guzmán's announcement that “the conditions are in place for inflation to be reduced month by month.”