Inflation in the management of Alberto Fernández It rose over 880%, but not all prices moved the same way.
Consultancy firm LCG says inflation from December 2019 to November 2023 exceeded 880%. “The acceleration in the price level occurred mainly starting from 2022, and especially in the last months of 2023,” he points out.
Over that period, seven of the twelve categories that make up the consumer price index (CPI) increased less than average. These include Communications and Accommodation and public tariffs, mostly regulated prices. Of those who varied above, Clothing and Footwear, Restaurants and Hotels and Food and Drink are the 3 categories that stand out.
These last three categories have increased 44%, 30% and 16% respectively.
Inflation of Clothing and Footwear since 2019 exceeded 1250%. “This could be due to a decline in supply, but given the characteristics of the sector, both local production and imports of these goods should be taken into account,” slips LCG.
In the last 4 years, national production in the sector has increased by 7%. If only for this effect, prices should decrease. But the offer of clothing and footwear is not only provided domestically, there is also an imported offer.
The entry of products from abroad “have decreased significantly in recent years: the categories linked to this item decreased by 36% between December 2019 and November 2023. Then there could be a certain ambiguous effect on supply, an increase due to domestic production, albeit a decrease on the import side, but it is these that impose greater price discipline,” LCG points out.
Added to this is that in a context of high inflation and little incentive to save, consumption tends to increase. AS, “Import restrictions have caused prices to rise, impacting profitability margins and increasing local productionall in a context of greater demand (partly mitigated by the same increase in prices)”.
Another category with upfront pricing is Restaurants and Hotels with variations of almost 1150% in the analyzed period. In this case the explanation for the jump in prices comes from the demand side. On the one hand, in the post-pandemic period, families have invested more resources in recreational activities. For the other, the entry of touristsespecially from neighboring countries, have contributed to keeping prices high.
This would explain the increase in restaurant and hotel prices above the general price level a demand shock.
Finally, among the top three with the greatest price changes between December 2019 and November 2023 is Food and Beverages, which represent 27% of the total basket. “It is an item with a lower price elasticity than other items. Despite the containment measures implemented such as fair prices, food and drink products are the ones that have increased the most since December 2022 (172%)”.
The explanation for the jump in food prices is linked to the fact that the production of this good grows at a slower rate than that of general industry.
The fact that these items have risen more than inflation could help slow the index. “Under a price stabilization framework, the existence of prices that are far ahead of others can potentially lead to an increase in prices an opportunity to collaborate on disinflation,” says LCG.
“The recession itself and rising prices will put a limit on restaurant increases, since in times of crisis it is usually an expense that needs to be cut. But, at the same time, a cheaper dollar for tourists can mitigate this effect” , they noted. . .
Furthermore, on the textile and footwear side “There is room for import liberalization to impose greater rigor in the price dynamics of this sector. “The same would happen if greater imports of electronics and other devices were allowed, along with a reduction in tariffs, to regulate some sales values.”
However, the consultancy warns that “much will depend on the capacity of the country and its government increase the stock of dollars available at the Central Bank”.
Source: Clarin
