Graphic: Inflation’s post-lockdown comeback

20th August 2020

By The Essential Staff

Graphic: Inflation’s post-lockdown comeback

Inflation has taken the backseat in Argentina this year, after freezings in December and the worsening of the recession due to the COVID-19 pandemic since March slowed down price inertia, despite the massive money printing required to sustain the lockdown. But the first signs that this trend might be coming to an end are starting to appear.

</p> <img class="wp-image-10697 aligncenter" src="" alt="Monthly inflation in Argentina over the last 12 months" width="647" height="420" srcset=" 2500w, 300w, 1024w, 768w, 1536w, 2048w, 600w" sizes="(max-width: 647px) 100vw, 647px" /> <p>As the graphic above shows, the INDEC statistics bureau monthly price index recorded its <a href="">lowest increases</a> in the months of the lockdown, with three periods below the 2 percent threshold, something that no central banker had achieved for even a month during the last two years of Mauricio Macri&#8217;s administration.</p> <p>But much of the slowdown took place for the wrong reasons. Recessions generally slow inflation down, and the COVID-19 crisis was no exception. Consumers retreat into more precautionary behavior and save more than they spend, while salaries are frozen or cut and more jobs are lost than created. In addition, the price freezes in basic services such as gas and electricity dictated after Fernández took office, plus additional ones since the start of the lockdown (rent, basic products) helped contain the overall basic basket of goods throughout the year.</p> <p>The lockdown is now progressively being eased in Buenos Aires, however, while some price hikes are already being authorized by the government, starting with a 4.5 percent rise in gas this week, which is likely to have knock on effects on other products that have transportation as part of their cost structure as well. Rent and a few supermarket products are also expected to see hikes over the coming weeks.</p> <p>As consumption and salary negotiations also resume, private consultants believe that the months of inflation below 2 percent will not be repeated in future INDEC measurements, particularly if the <a href="">Central Bank</a> is forced into a faster devaluation of its official exchange rate.</p> <p>

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The Essential Staff

The Essential is a premium subscription-based news platform that brings you high quality journalism and in-depth coverage in English about the changing face of Argentina’s politics and economy.