With current inflation, prices double every 13 months

With data of 5.3% inflation in June and 36.2% in the first half, prices are already running at an annualized rate of 85.8%. Therefore, prices double every 13 months, according to a report by stock exchange firm GMA Capital.

“During the first half of the year, inflation accumulated 36.2%, this is an annualized 85.5%, a rate which implies that prices double every 13 months“, underlines GMA.

But last month’s data pales in front of the July projections which already place the index above 7%.

“With monthly inflation of 7-8% (the July numbers go in that direction), expectations automatically adjust and the redial process is much faster. At the same time, the import trap generates severe restrictions on the supply and availability of imported goods, exacerbating the previous picture, “says Nery Persichini, CFO of GMA.

“Triple-digit inflation means that prices double in less than 12 months, something that hasn’t happened in Argentina since 1990,” Persichini anticipates.

For the full year, analysts say inflation will be between 80 and 90% this year. “The 80% hypothesis” (or more), in addition to inertia and expectations, is gaining momentum because the variables that served as rudimentary price anchors, such as rates (segmentation has already begun) and the official dollar (crawling peg has accelerated to 80% annualized), they are picking up the pace, ”GMA says.

If inflation were confirmed at 7% for July, an index of 45.7% would accumulate in the first seven months of the year. From there, so that the registration does not exceed 70% throughout 2022, the only possibility would be that it would average 3% per month.

Assuming an index of 4% per month, 2022 would end with inflation of 77% per year. And with 5% per month, the annual registration would be 86%.

“The likelihood of inflation at the end of 2022 to be below 80% has been significantly reduced in the past two weeks due to price increases and product shortages associated with tightening stocks,” GMA said.

The jump in the index in July is linked to the shock following the departure of Martín Guzmán from the Ministry of Economy. On this are mounted a series of increases already underway: increases of 20% in telephony, 15% in private schools and 4% in prepaid.

“Inflation in July would reach 7% per month. The current 7% rate is 2 points higher than the dollar and 3 points higher than the Badlar interest rate,” which is received from placements of over 1 million pesos, adds Fernando Marull, director of FMyA. “We maintain an annual projection of 90%, with the risk that it will be even worse if expectations do not improve.”

“The records of the last few months are the best symptom of the prolonged macro deterioration process that is taking place in Argentina,” says Consultatio. With a floor of 7% for July, “if the devaluation of the official exchange continues on the path of 4/5%, the current floor of the inflation of 7% seems even optimistic”.

“With accelerating inflation as a trigger, social tensions do not subside and if current dynamics are not reversed, they could worsen,” says Consultatio.