Facundo Iglesia 
May inflation was 7.8% according to the National Institute for Statistics and Census (INDEC, its Spanish acronym), a 0.6% drop compared to last month’s index — the first deceleration since November. However, it is the second-highest monthly figure since April 2002.
Year-on-year inflation hit 114.2% and the total inflation for the first five months of the year was 42.2%, according to the report published today.
Food prices had the biggest influence on the index, with a 5.8% monthly increase. The price hikes, which were 1.7 percentage points higher than the general index, were caused by increased bread, cereals, dairy products, and eggs, according to the INDEC.
“Housing, utilities and fuels” led the increase with an 11.9% hike, mainly due to a surge in electricity and natural gas bill prices. It was followed by “restaurants and hospitality” with a 9.3% monthly jump, and “healthcare,” which was driven by an increase in medication and prepaid medicine bill prices.
Causes and forecasts
The monthly inflation was 1.2 points lower than expected by most of the private sector. The Central Bank’s Market Expectations Survey (REM), which averages forecasts from different consulting agencies and banks, predicted a 9% average inflation for May and 148.9% for the entire year – 22.5 points more than the numbers revealed today.
However, a report by the Central Bank stated that from the moment the survey was conducted —between May 29 and 31— “new information was known that suggests monthly inflation had eased compared to the 8.4% from last month.”
This new information included Buenos Aires City’s 7.5% inflation rate which was published last week — 0.3% points lower than the index for April. The Economy Ministry shared the Central Bank’s optimism and calculated a national inflation rate similar to the one made by the Buenos Aires City government.
Last November, Economy Minister Sergio Massa said he hoped for a slow but steady reduction of inflation, with a monthly rate below 4% by April — instead, April saw an 8.4% increase. The minister did not make any other specific public inflation predictions after that.
Minutes after the figures were published, leaders of the opposition parties heavily criticized the government’s economic policy.
“The monthly index of failure and decline,” PRO presidential hopeful Patricia Bullrich tweeted. “[And] there are no policies to reverse it.”
“People’s numbers don’t add up, there’s not enough money and we cannot make ends meet,” Buenos Aires City Mayor Horacio Rodríguez Larreta, tweeted. “We cannot go on like this.”
According to a report by the Ecolatina consulting firm, besides the increase in utility bills, prices in May were driven mainly by the jump in parallel US dollar exchange rates, led by currency runs against the peso the government is trying to suffocate. The MEP dollar exchange went from AR$436.05 to AR$466.98 over the course of the month, with a AR$ 473.5 peak on May 18.
