Inflation accelerated again in September and stood at 9.95% in the accumulated figure for the last 12 months, from a previous 9.53% in August. Thus he touched his highest level in two years.
In the ninth month of the year, prices rose 0.84%, according to information published by the National Institute of Statistics (INE) and they were above the expectations of analysts who were located at 0.5% in the median, according to the Survey of Expectations of the Central Bank (BCU). Much of this variation was explained by strong increases in the prices of volatile items such as fruits and vegetables.
What do analysts expect for the coming months?
In dialogue with The Observer, Exante’s economist, Florencia Carriquiryhighlighted that in the monthly data what “surprised” was the increase in fruits and vegetables, but there were no big changes in the behavior of other components. In this context, he argued that The view is maintained that in the last months of 2022 and the first months of 2023, inflation “will tend to give way”.
“With the recent evolution of commodity prices, of food in general, of oil, this perception is reinforced because increases as high as those of some of the last months of 2021 and especially the first months of 2022 will not be repeated. Beyond the fact that we can slightly change the shorter-term projection, we continue to think of inflation falling to levels on the axis of 7% for next year,” said Carriquiry.
The economist added that in this framework, with nominal salary increases similar to those of this year, between 8.5% and 9%, We will see a recovery in real wages from 2023, which would be around 1.5%.
For its part, the economist of PwC, Ramón Pampín, highlighted that practically half of the inflation in September corresponds to the rise in prices of legumes and vegetables, and especially tomatoes. Thus, the data for September does not contribute much to understanding the inflationary process.
Instead, If you move to 12 months and remove the most volatile data, the core inflation measure stands at 9.5%.“which gives very little margin for the behavior of the rest of the prices”, he told The Observer. Core inflation excludes items whose prices are highly volatile and some whose prices are administered by the State (public rates).
While, the economist of the Center for Development Studies (CED), Ignacio Umpiérrez, pointed out that beyond the negative incidence of fruits and vegetables that affected the specific data for September, and the lower expectations of tradable inflation. “The most worrying thing continues to be non-tradable inflation, which seems to be consolidating above 9%”, he warned.
Beyond the negative incidence of fruits and vegetables that affected the punctual data for September and the lower expectations of tradable inflation; The most worrying thing continues to be non-tradable inflation, which seems to be consolidating above 9%. pic.twitter.com/eVc5stJwK9
— Ignacio Umpiérrez (@IgnacioUmpierez) October 5, 2022
The vision of the PIT-CNT
Last month and with inflation at 9.53%, the Cuesta Duarte Institute of the PIT-CNT had indicated that the percentage of price growth is “high”, both for the government’s objectives and in comparison with the rate of increase in prices. labor income
The Average Salary Index (IMS) shows a variation of 9.94% in the last 12 months to August, and 8.83% in the annual accumulated. There are four months left for the annual closing of this indicator and it is not expected that there will be a significant variation because salary adjustments are strongly concentrated in January and July.
“Based on the foregoing, we can affirm that if there is no reduction in inflation in the last part of the year or if there is a drop in it, but this is of little magnitude, we will close the year with a tie between the average salary and inflation, or a difference of a few tenths between one variable and another. This implies a new year no growth of the purchasing power of wages”, warned The report.
The inflation expected by the median of the analysts who participate in the BCU survey is currently 8.9% for the end of the year. Although a moderation is projected with respect to current values, it would be above the official goal stipulated by the Ministry of Economy and Finance in the last Rendering of Accounts (8.5%).
Expectations and interest rate
This Thursday will meet again Monetary Policy Committee (Copom) of the BCU. In August, the Monetary Policy Rate (MPR) had increased again by 50 basis points to 10.25%, in line with what was announced in July.
Since that meeting, the inflation expected by the median of analysts in the 24-month horizon (relevant for monetary policy) rose again and stood at 7% in September, according to the BCU survey, 1 point above the ceiling from the target range 3% and 6%) and far from the center of the range (4.5%).
For their part, Uruguayan businessmen project an inflation of 8.3% for the next 24 months. This implies that the contractionary policy that the BCU is promoting by raising the interest rate has not yet managed to anchor expectations.
Can a more aggressive rise be expected on this day? The economist Pampín pointed out that in the strategy that the bank has been adopting, it will surely adopt an increase in rates, which would be 50 points (0.5%).
In any case, he considered that although the “non-inflationary” causes of the September data are clear, it is also true that the bank is behind anchoring expectations and “it is possible that it wants to moderate them with a more emphatic message with a more forceful rise to that expected half percentage point.
In addition, Pampín recalled that there will be two more Copom meetings this year and that they will surely be with more benevolent data on inflation. “Perhaps the power of fire will be concentrated in this meeting on Thursday,” he estimated.
For his part, the economist José Licandro expressed on his Twitter account that the Copom will probably raise the MPR by 50 bps. He also reiterated that from his point of view the Central “should change its strategy to a more daring one.”
Between the publication of the IPC and the Business Expectations for September, tomorrow the COPOM will probably raise the MPR by 50 bps as it announced in July. But our opinion is that it should be more aggressive because of the arguments I made last week:https://t.co/ekTUTmNrQa
– jose licandro (@licandro1) October 5, 2022
inflation in september
In September, the items that had the greatest impact on the CPI were food and non-alcoholic beverages (0.63%), housing (0.04%), health (0.06%), transportation (-0.04%) and restaurants and hotels (0.07%).
The food and beverage category rose 2.25%. Here, increases in legumes and vegetables of 13.31% stand out. There were price increases in tomatoes (103.34%), onion (10.51%), pumpkin (18.96%), bell pepper (14.17%) and sweet potato (14.22%). And there were price drops in zucchini (-31.50%), carrot (-6.93%) and potato (-6.79%).
Fruit also rose (4.35%). The increase in the prices of banana (8.69%) and pear (12.06%) stands out. In addition, bread and cereals increased (0.75%). Here the increases in flute bread (1.48%), rice (2.47%) and noodles (1.13%) stand out, according to the INE.
Meanwhile, products like milk, cheese and eggs they became 3.52% more expensive. The increase in the price of whole common milk (8.86%) and skimmed common milk (8.98%) stands out. Meat increased 0.25%. The increase in the price of strip roast (0.63%) and whole chicken (1.9%) stands out, according to the INE.