What will happen to inflation?: the data for May in CABA and Córdoba cooled the fear of double digits

There will be nothing to celebrate when the inflation data for last month is known next Wednesday, but the indices that preceded the INDEC publication at least allow us to sustain the notion that double-digit monthly inflation is not as close as expected. feared that the data of 8.4% for April was just released.

This record led private market consultants, whose measurements underestimated the CPI in previous months, to anticipate inflation of around 9% for May and even higher. This is precisely what was reflected yesterday in the Survey of Market Expectations (REM) published by the Central Bank. Also in the economic team itself they feared that figure, with partial data in the middle of last month. Over the days, however, the pressure seems to have eased. And the information from different jurisdictions, known after the closure of the REM, directly brought relief to officials.

“The data for May from the City of Buenos Aires (7.5%) and Córdoba (8%) cooled market expectations about the National CPI that INDEC will publish next Wednesday,” Anker economists said, where they recognized that the context of high “nominality” makes the monthly projection difficult but that the trend is sustained at a high level.

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“These levels of nominality hinder the projection from month to month, since price dispersion increases and contract renegotiation terms are reduced. We believe that there are various factors that ensure a high inflation floor for the coming months, beyond the fact that the dynamics are not linear and some month may come below the previous one”, they explained.

In this line, that of C&T consultores is one of the private measurements that, although it registers an increase compared to the April data, it is marginal and is still far from the feared double digits. According to this survey of retail prices for the GBA region, the monthly increase was 8.7% last month, “exceeding the variation of April and May of last year. Thus, the twelve-month variation climbed to 118.9%, the highest since August 1991″.

Nation and Cordoba

The measurement of the City of Buenos Aires, which showed a slight decrease compared to the previous month –7.5% vs. 7.8%– provided another piece of information that encourages the spirit of the economic team. After several months in which the food and beverage category was above the general level, in May it was finally below by almost one point, averaging 6.6 percent. In the Buenos Aires index, by far, the item that most impacted the rise was “housing, water, electricity and other fuels”, which with an increase of 12.5%, showed the effect of the rate increase. This impact is usually greater in the Buenos Aires area than in Greater Buenos Aires, due to the higher incidence of the social rate in the Buenos Aires suburbs. This detail is the basis of the preliminary information that circulates in the different official offices where they admit that inflation in May “was the same as that of April.”

Predictably, a record of these characteristics decompresses the pressure and removes the ghost of the two digits. But it doesn’t remove it. And it doesn’t even push it that far away.

“By forward estimating the monetary issue factors (mainly due to the purchase of bonds in pesos, direct financing to the Treasury and interest on remunerated liabilities) and assuming stability in the real demand for pesos, we calculate a “floor” inflation in the area of ​​7 % monthly. With the fuel from the issue, the inflationary dynamics in the short term will depend to a large extent on the behavior of the demand for pesos”, they affirmed from Anker.

In the consultancy, in tune with the market consensus, they no longer expect an economic program that “manages to anchor expectations” and curb the rejection of the pesos that has been detected in recent months. “In the best of cases, inflation can move in the area of ​​7-8% per month,” she insisted.

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