SEIDO Flash Report: Inflation was 3.2% in June

Monthly inflation remained almost stable. Official statistics reported a 3.2% MoM increase of consumer prices in June (vs 3.3% MoM in May), the same rate estimated by our high-frequency CPI (see here) and private forecasts (see latest BCRA survey here). Inflation remains high despite price controls and agreements, low incidence of regulated prices and the use of FX as nominal anchor. Last year’s monetary expansion cannot be overlooked when looking for an explanation for the current inflationary situation. Compared to last year, consumer prices increased 50.2% YoY (vs previous 48.8% YoY).

We expect monthly inflation to slightly decrease in July (to around 3% MoM). Statistical carry-over remains relatively low and the government will continue using the (official) FX rate as nominal anchor (1.2% MoM in June, fifth month in a row below the inflation rate). However, some regulated price adjustments (phone and internet services, healthcare) will take a toll on the CPI. Moreover, unanchored expectations and the upcoming elections can also put some pressure through nominal wage growth (which has accelerated from an average of 2.4% per month in 2020 to 4.0% in 2021).

July has started with a left foot. Our high-frequency CPI reports an increase of 1.4% WoW, higher than recent printings, or 2.7% MoM. Core inflation also accelerated (1.0% WoW vs previous 0.1% WoW), though it is increasing at a lower rate than headline inflation.

Core CPI put pressure on June’s inflation rate. Core inflation was of 3.6% MoM (vs 3.5% MoM), while seasonal items inflation was of 0.5% MoM (vs 1.5% MoM) and regulated prices increased 3.2% MoM (vs 3.8% MoM). Communication and Alcoholic Beverages & Tobacco showed the highest price increases, with variations of 6.0% MoM (vs 10.8% MoM in March) and 4.2% MoM (vs 10.8% MoM in March), respectively.