Due to the burden of services, education, prepaid bills, cars, among others, March inflation hit the middle class directly and to a greater extent. While average inflation was 11%, the increase in prices of services rose to 15.5%, according to INDEC data. And with more strength in the capital and in greater Buenos Aires.
Official data shows that in the Metropolitan Region, Education had an increase of 47.0%, Electricity, gas and other fuels by 33.6%, Recreational and cultural services +18.3%, Prepaid expenses +18.5 %, Purchase of vehicles 17.9%.
In the first 3 months of this year, compared to an average inflation of 53.2% in the Metropolitan Region, items such as Electricity, gas and other fuels increased by 121.1%, Prepaid Expenses increased by 105.4 % (double the average), Telephone and internet services +84.2%, Personal care services +82.9%, Education +70.3% and Recreational and cultural services +55.7%.
AS without stopping the increase in the poverty threshold (during March it increased by 11.9% and 56.0% January-March and a value of $773,385.10 for a typical family, without rent), this inflation explains why levels of destitution and poverty continue to increase and worsen with new sectors of the middle class. And this despite the fact that they are limiting consumption, such as those related to recreation, leisure, automobile, refueling, education and healthcare. For example, by switching to prepaid plans with less coverage or canceling subscriptions directly, or moving children away from high-cost private schools or reduced car use.
The tax package also impacts the salaried and professional middle class Because, if the profit change is approved, an estimated 800,000 middle- and high-income employees will pay the tax, and those who were already covered will have to pay more.
On the other hand, these levels of inflation in pesos also mean a very high inflation in dollars – due to rising peso prices with a semi-frozen official dollar – causing many foreign products and inputs to be cheaper to import than to produce in the country. This is affecting manufacturing, particularly small and medium-sized industries, affecting employment levels.
The consultancy firm LCG underlines this “The question remains what the outcome of the exchange rate will be.” after these months in which the exchange rate served as an anchor. “It is down 36% compared to the level of competitiveness achieved with the devaluation.” But he adds that “with imports already regularized, there will be new pressure for an increase” in the value of the dollar, with its impact on domestic prices.
Added to this is “the pressure that the distribution offer could generate after a vertical drop in wages of 24% in real terms in 4 months. From LCG we expect inflation of 215% per year measured in December, although with peaks of 325% towards the middle of the year”.
Furthermore, the commercial or industrial middle class, with lower sales, has to face higher costs for the renewal of rental contracts, electricity and gas tariffs, and taxes related to their activities.
Meanwhile, service prices still have a significant way to go. On an annual basis, services increased by 250.4% and goods by 302.4%.
Source: Clarin
