March 11, 2014
A positive step, analysts await consistency
Economists agree reform is needed but say only time will tell whether change will stickThe new consumer price index (IPCNu) report is a positive step for the country to rebuild confidence after seven years of fudged inflation figures by the INDEC statistics bureau, economists largely agreed yesterday, although many were also quick to warn that only time would tell whether the trend of more authentic price-rise statistics would continue throughout the year.
IDESA economist Jorge Colina was tentative, telling the Herald “it’s certainly a positive first step, but what we need to see is INDEC publishing an extensive description of the methodology and prices used,” as was the norm before former Domestic Trade secretary Guillermo Moreno intervened in the bureau in 2007.
There was further agreement that the development will satisfy the demands of the International Monetary Fund, implying that its censure on Argentina is likely to be lifted. The IMF had reacted positively when the Fernández de Kirchner administration submitted the outline of the reform for its CPI methodology — taking into account prices at a federal level. However, the organization led by Christine Lagarde, whose technicians took part in the reform process, said it would wait until the first official report before passing decisive judgement.
“This re-establishes a reasonable economic policy for the country, and the IMF is an institution that bases itself on trustworthy data, so this will satisfy their demands,” said PRO think tank Fundación Pensar economist José Anchorena.
The think tank’s economic development director added that greater confidence would be generated in consumers, investors and international creditors through “transparency in aggregate, but more importantly, disaggregated data.”
University of Buenos Aires economist Mariano Kestelboim was optimistic, considering the report a “great opportunity to begin to re-establish the system of national statistics.”
“Through its reach (the new CPI) will be fundamental to start working on sector accords” such as “price agreements, inflation objectives and the organization of macroeconomic guidelines,” Kestelboim argued, adding: “It had been delayed for too long.”
Certainly the new index will provide a sturdier basis for unions to ground their arguments during collective wage bargaining, with Kestelboim highlighting that “both parties will be able to negotiate based on solid, rigorous data,” in turn giving “both the private and public sectors greater stability.”
Plan Fénix economist Ariel Setton said the IMF, and a large part of the opposition’s, demand for numbers to reflect “what is seen on a day-to-day” basis were met.
“The index went from reflecting an unknown basket of goods that served a merely statistical purpose to posses a national character that you feel in your pocket every day,” Setton said, adding nonetheless that he would like to see reliable figures over the next year, maintaining “the IPCNu is not the end of all of the change needed.”
In a news release, after defining the IPCNu as a positive development in line with private estimates, the Abeceb consultancy pointed out “certain questions to follow closely.”
“The prices surveyed are still not published, which would give the index greater credibility,” and “there has been a reduction in the contemplation of Food and Drinks, Housing and Basic Services and Education” goods, “while Leisure, Equipment and Home, Transport and Communications and Clothing had increased participation.”
Furthermore, Abeceb emphasized the effect the government-sponsored Price Watch scheme may have on future figures, as price agreements only reached a national level as of February.
“This factor could contribute to the deceleration of inflation as of the next report,” the consultancy adds.
In harmony with Kestelboim’s statements, Acebeb emphasized that having a “single statistic to measure the evolution of prices is fundamental for the functioning of the economy, particularly ahead of the next wage negotiations.”
The sigh of relief at finally palpable authenticity after seven years of number fudging cast a shadow over how high inflation clocked in, which is not to say this aspect was overlooked.
PRO lawmaker and economist Federico Sturzengger told the Herald that “the government has recognized inflation that would be a catastrophe in any other country in the world.”
“At least the number for January has credibility, this was a sine qua non prerequisite. The question now is whether it will be maintained,” he said in the vein of his PRO colleague, Anchorena.
The latter said that “annualizing the figure is alarming, although it was a month marked by an important devaluation, and most prices were affected.”
“The government bought itself time with the devaluation, but with inflation at this rate, it’ll be about six months before growth is affected,” Anchorena added.
Although recognizing 3.7 percent as high, Kestelboim referred to annualizing as “nonsense.”
“In a country with an economy as volatile as Argentina’s, annualized inflation is a useless statistic, particularly in a month with a steep change in the dollar rate.
Asked about the effect of recognizing high levels of inflation on bonds that pay out in relations with the CER inflation index, Colina told the Herald that “so few people held on to them after inflation began to be underreported in 2007” that the “economic effects are irrelevant.”