Key Takeaways
- A significant deceleration, and even price drops, in Argentina’s crucial food and beverage sector in May is expected to heavily influence the overall Consumer Price Index.
- Private consultants and the Central Bank’s Market Expectations Survey (REM) forecast May inflation around 2%, with projections for June to fall below 2% for the first time in five years.
- This unexpected slowdown, particularly in a sector accounting for nearly a quarter of household spending, has led market experts to revise down future inflation and exchange rate forecasts, potentially marking a turning point.
Argentina is closely watching for the official release of its May Consumer Price Index (CPI) on June 13, with growing optimism driven by a significant slowdown in a key component: food and beverages. Preliminary data from multiple private consulting firms suggest that price increases in this crucial sector have sharply decelerated, and in some cases even reversed, potentially steering the overall inflation rate to its lowest point in months. This development offers a glimmer of hope in a country that has grappled with rampant inflation for years.
The food and beverage category holds substantial weight in Argentina’s CPI calculation, accounting for nearly a quarter of household expenditure, according to INDEC, the national statistics agency. Consequently, any significant movement within this sector has a disproportionate impact on the headline inflation figure. For May, private analysts widely agree that inflation in this segment fell below 2%, largely due to a slowdown—and even a notable decline—in the prices of basic basket staples.
The Central Bank’s Market Expectations Survey (REM), which compiles projections from 42 consultants, research centers, and banks, echoed this sentiment. Released on Thursday, the REM indicated a median forecast of 2.1% for May’s overall inflation. More remarkably, the survey projects that June’s inflation rate could breach the 2% threshold, a level not seen in Argentina in five years.
Detailed tracking by LCG, a consulting firm specializing in food and beverage prices, illustrates the extent of this deceleration. In the fourth week of May, prices in this category increased by a mere 0.2%, a sharp drop from the 2.1% rise observed the previous week. The most striking figure was the accumulated monthly average over the last four weeks of May, which registered an increase of just 0.1%. This was driven by significant price drops in several sub-categories, including vegetables (-6.8%), ready-to-eat meals (-1.3%), meats (-0.6%), fruits (-0.4%), and dairy and eggs (-0.2%). The only notable counterpoint was an increase of 5.2% in beverages and infusions during the month.
Another private consultancy, Econviews, reported similarly moderate inflation for food and beverages in Greater Buenos Aires. Their basket saw a 0.9% increase in the fourth week of May, with an accumulated variation of only 0.5% over the preceding four weeks. While greengrocer prices registered a 4.8% average rise within this group, most other products experienced negligible increases or even decreases. Eco Go, another firm, estimated May’s general inflation to be near 2%. They attributed this moderation primarily to the subdued food inflation, despite specific upward pressures like a 7% hike in AMBA bus fares and a 0.2% adjustment in fuel prices.
Looking into early June, LCG’s monitoring suggests the trend of moderation is largely holding. The first week of June saw no increases in food and beverage prices. The average inflation over the preceding four weeks remained at 0.1%, still influenced by the significant decline observed in the second week of May. The point-to-point variation for this period was 0.7%. While there was a strong drop in home beverages and infusions (-5.4%) at the start of June, this was partially offset by increases in meats (1.4%) and dairy and eggs (1.2%), indicating some volatility within the overall trend.
The consistent pattern of decelerating price increases, particularly in a sector so critical to daily household budgets, has prompted market experts to revise their economic outlooks. Following the latest official INDEC data and these recent private estimations, many “market gurus” have not only cut their inflation expectations but have also adjusted downwards their forecasts for the evolution of the U.S. dollar in Argentina, signaling a perceived shift towards greater economic stability and reduced inflationary pressures. This potential turning point could offer much-needed relief to Argentine consumers.