November 20, 2014
Gov’t to unveil new inflation index today
Years of complaints from economists and politicians over the country’s national consumer price data after the intervention of INDEC statistics bureau in 2007 could come to an end today when the federal government unveils its new national consumer price index (IPCNU).
There is lots of anticipation about how high January’s inflation will be, and whether the new index will close the wide gap that exists between public and private estimates. Yesterday, opposition leaders in Congress released the monthly index that takes an average of private estimates, claiming prices rose 4.61 percent, the highest monthly raise since 1991.
The new index comes after the International Monetary Fund March deadline for the government to change its national data statistics. The IMF had censured Argentina in February 2012 over failing to improve the accuracy of its inflation and gross domestic product growth data but praised changes carried out by the government so far on creating the new price index.
Instead of only measuring data of the metropolitan area, the new price index will take into account price variations of all the provinces except Buenos Aires City, which chose not to be part of it.
The index will be published monthly and will use a fixed basket of goods and services. It will become a reference point for determining values for the basic food basket and total goods basket, which are used to measure poverty and destitution. No details have been released yet over its the methodology but in previous statements government officers had said 200,000 prices will be measured by 500 pollsters in 100 locations nationwide.
“Argentina can no longer have statistics with the same problems. Nevertheless, the price index is not the only solution to have a better image of the real economy,” Ariel Setton, a Plan Fénix economist, told the Herald .”The inflation rate will depend on the methodology used by INDEC, which has not been released yet.”
Everyone expects a large number considering the 66 percent increase in public transportation in the metropolitan area and increases on various goods such as fuels, electronics, food and domestic appliances after the steep peso devaluation in January. In 2013 INDEC estimated a 10.9 percent inflation, much lower than the 28.3 percent of private consultancies.
“I’m not optimistic about the new price index. The government had numerous chances to change it but never did. January’s inflation will probably lower than the one released by private agencies,” Esteban Domecq, economist and head of Invecq consultancy, told the Herald. “We need to have an index that shows what really happens in the economy.”
Data released in the past weeks can be used to compare the new price index presented today. The Buenos Aires City Statistics Bureau reported a 4.8 percent inflation in January, a figure that doubles December’s 2.3 percent.
“I hope the index is accurate and transparent but having it won’t solve the current high inflation. It’s the way to put an end to a discussion that avoids working out the real problems,” Estanislao Malic, and economist, told the Herald. “Now if statistics improve opposition leaders will have to unveil their plans to fight inflation.”
A seven-year plan
Since the creation of the INDEC statistics bureau in 1968, statistics of the price index have been questioned because figures are the result of a rate that doesn’t affect in the same manner all social classes. Nevertheless, controversy boosted in January 2007 when INDEC was intervened.
Former head of INDEC Graciela Bevacqua was laid off and replaced with Beatriz Paglieri, an ally of former Trade Secretary Guillermo Moreno. January’s inflation was estimated back then at 1.1 percent, a figure questioned by Bevacqua who said it was “mathematically impossible” to be that low. Numerous INDEC employees decided to resign as a way to show their support for Bevacqua.
After several position changes, Ana María Edwin became the new head of INDEC in July 2007, position she currently holds. A change was made in the methodology used to estimate the price index, which was harshly criticized and led to private agencies starting measuring their own figures.
The National General Audit (AGN) said back then the INDEC data couldn’t be trusted because of “unacceptable risks” taken by the agency by using an “outdated information network.”
“The methodology was changed and some values stopped being released to the public. The INDEC stopped taking in account an average price of products and instead started using the lowest price,” Setton said. “At the same time, INDEC implemented a rule based on which it assumes that when a product increases its price a lot consumers will choose its competitor.”
After years of controversy over the price index, on February 2013 the International Monetary Fund sanctioned Argentina with a “motion of censure” due to a lack of credibility on inflation and economic growth data. The government was blamed for not fulfilling Article 8 of the IMF regulations, which requires its members to give precise and truthful information on the evolution of its economy.
After paying its debt, Argentina has refused to participate in the IMF’s annual economic assessment for the past seven years — though this is not a unique case in South America. Ecuador has shunned the assessments for the past five years, and Venezuela has not participated since 2004.
Nevertheless, the government’s relationship with the Fund began to change after the IMF board recognized the work done so far to change the price index. Last year, the IMF board praised “the work and attempt to introduce a new Consumer Price Index at the start of 2014,” as well as efforts to “alleviate deficiencies in GDP statistics.”