After the strong impact of inflation at 25.5% in December, Price increases are slowing at a considerable pace. In January, the consumer price index rose to 20.6% and the change in February, which will be known on Tuesday, is expected to be around 20.6%. 15%. Why does the controversial economic variable slow down like this? What are the reasons why retail prices have started a downward trend? Will it continue in March?
Regarding the first question, experts explain that inflation has three fundamental components: one inertialwhich is “strong” inflation, a component of the modification of the relative prices and another ingredient that is “pass” that is, the transfer of devaluation to prices.
In December, for example, the inertial component was 8 or 9 points; the relative prices equal to 10 and the pass through equal to 5 points. In January the situation was similar and downward. But nowthe “passage is zero, because companies can no longer continue to pass on the increases in the cost of devaluation due to the recession to prices. People don’t have money and buy less.
“Additionally, core inflation may have eased slightly and add to that the factor of the recession and a strong monetary tightening together with the relative prices that begin to move less. For these reasons, inflation slows down,” explains Juan Pablo Ronderos, economist at MAP Economic & Business Advisors.
However, the expert does not believe that it will slow down much more because inertial inflation will take longer to fall. think. “Many relative prices in transport, electricity, gas and some movements in other prices still need to be adjusted. Pass through may have decreased, but as long as there is some room to pass on higher costs to products, in some cases companies will continue to do so,” she estimates.
But according to the analyst “all this brings with it the hope that inflation will slow down more strongly, because the Government is doing a very restrictive policy. The objective is that there is no more passage, that relative prices finish adjusting between April, May and June and inertial inflation begins to decline as a result of this restrictive policy,” calculates the economist.
In any case, the process of reducing inflation would not be as “linear” as the REM indicates for the coming months, explains the consultancy firm Equilibra. Because the first obstacle to the gradual and continuous slowdown of the economy monthly inflation AND March.
In this month there are specific and seasonal factors that usually make it rise: such as Educationfor the start of lessons, the impact of Easter in the consumption of certain foods such as fish and chocolate, and clothes, for the change of season.
According to this advice, specific seasonal and regulated factors could add an additional 1.8 points to March inflation in a scenario where the rest of the prices increase by 13%. According to his predictions, the general level would be around 15.9%according to the consultancy firm directed by economist Lorenzo Sigaut Gravina.
Another significant fact, according to this analysis, is that, since the Government pursues a rapid decrease in prices, “it could also be use the wage anchor to stop inflation in a context of strong loss of purchasing power”considered.
A fundamental aspect to take into consideration, in addition to the recessive factor, is the price of food products, which represents almost a quarter of the price index and which continues to slow down as the weeks go by, helping general inflation to fall”, adds Lautaro Moschet, economist at the Libertad y Progreso foundation. “Moreover, rents rise less for two reasons: there are more properties available and, with deregulation, some contracts are in dollars. With the fall of the dollar, rental prices in pesos also decrease.
Unlike his colleague, the economist estimates that in March, despite seasonality, “we can think that inflation will continue its decline and that in the short term we can think of a single-digit monthly rate,” he noted. For this we will have to wait until April 12, when the INDEC will report the result of the consumer price index (CPI) corresponding to the third month of the year.
SN
Source: Clarin
