With the 8.2% increase, wholesale prices put more pressure on the retail segment

In August, wholesale prices showed an increase of 8.2%outperforming retail inflation by 7%.

The wholesale increase was driven by the advance of the imported products that ranged by 9.1%prices of national agricultural products by 10.2%, leather and footwear (10.4%) and textile products (9.6%).

These increases were reflected in the retail trade index with increases in the prices of vegetables, fruit and vegetables, clothing and footwear.

Meanwhile, the overall level of the Capital and Greater Buenos Aires Construction Cost Index (ICC) recorded a 7.2% increase, driven by material prices of 8.9%, while labor costs ( 5.7%) was lower than retail inflation, according to INDEC data,

The statistical agency explains that the increase in the “labor” chapter is “as a result of a 5.9% increase in” wage labor “and a 5% increase in” subcontracting “.

The same is repeated for the first eight months of this year. While materials accumulate a 56.3% increase, labor costs are 43.7%, more than 10 points below the CPI. The same thing happens in relation to August 2021.

As the consultancy firm ACM points out, “the risk of the above mentioned dynamic lies in the fact that wholesale prices generate a transfer to resellers for the next few months. This confirms the 6% monthly retail inflation for the remaining months of the year “.

The increase in import prices advanced due to the greater devaluation of the official peso, which so far accelerated in September.

That’s why, according to the LCG consultant, with 9.1% monthly “Imported products marked the largest increase in 35 months”, while “for the second consecutive month the change in imported products differs by more than 3 percentage points from the change in the official exchange rate of the same month. In particular, in August this category grew by 3.8 points (5.3% the exchange rate rose) which means that other factors had a significant impact on price formation, a figure that had not been measured by the restocking of stocks. “.

For the next few months, estimates point to high inflationary levels.

“In an environment of increasingly high nominal value, the projection of wholesale (as well as retail) inflation has been adjusted upwards, with a floor of 95% on an annual basis in December, assuming monthly rates of 5, 7% on average in the past what is left of the year. This is due to expectations of a higher devaluation rate, tighter import restrictions and levels of international inflation that remain relatively high, mainly in energy and fuels, imposing higher costs. At the same time, we expect to see an effect from the rate hike that is expected to begin to apply in September, ”the LCG Advisor predicts.