warn about the high distortion of relative prices

A study prepared by the consultancy Sarandi highlights that “the distortion of relative prices after so many years of high inflation is immense”. In fact, when analyzing the evolution between the different chapters that make up the Consumer Price Index (CPI) and the general average level between December 2019 and July 2022, there are gaps that reach 37%.

It is the case of division Clothing and footwear, which climbed 37.2% above the general CPI in the last two and a half years. They are followed by Restaurants and hotels (15.3%), Food and beverages (5.4%), Recreation and culture (4.3%). On the contrary, among the items that grew below the general CPI, are: Education (-7.5%); Other goods and services (-16.1%); Housing and public services (-31.6%); Communications (-37.9%).

“Behind this process is the absence of references: consumers who do not know how much they pay for goods and services, with a price system totally useless to generate signals”was highlighted from the consultant.

In that sense, from Sarandí they pointed out that “an anti-inflationary plan is essential that escapes the short term and even transcends the different governments”. “Minister Massa seems to promote a program based on the macro-fiscal order as a mechanism to calm expectations, which had disbanded in the context of political instability. The monetary signal of strict compliance with the non-issuance goal is also a signal to anchor. It goes in the right direction, but it does not seem enough”, they added from the consultant.

Effects of price distortion

This price distortion is not only visible between the different sectors of the economy. It is also observed, in fact, in the same product of the same brand, according to the different sales channels.

“The loss of reference prices generates a very worrying scenario for Argentines who make their purchasesbecause you don’t know if you are paying for an expensive or cheap good or service,” Damián Di Pace, director of the consulting firm Focus Market, told Ámbito.

“What is happening in the market is that stores that have stock, for example a Chinese supermarket, and do not have a high turnover of a product category, have a certain price. While a large area, which has stock and perhaps liquidates it due to an offer or promotion, when it replenishes weekly, it has a different price”, added Di Pace, who explained: “Prices are adjusted in very different ways in the market. It happens to all commercial formats.”

“As price adjustments rapidly increased their cycle, each one has prices according to that adjustment. So, there is going to be a very large price distortion in the wholesale and retail market at this time, even for the same brand and even the same product,” the analyst stressed.

It is in this scenario that the Government seeks to contain the distortion in the different sectors of the economy with different price agreement programs. “These agreements may moderate the impact on some channels and on certain categories. But not above all, because ultimately inflation is the general variation of all prices of goods and services in the economy. So, in a limited basket, perhaps that lack of predictability on the part of Argentines can be broken to replenish their assets; but for another part, that same dynamic, in the current context, is going to continue happening”, Di Pace clarified.

In fact, a few days ago the new Secretary of Domestic and Foreign Trade Matias Tombolini He mentioned what will be the objective of the new program of Prices Care: “Prices must be recovered as a unit of useful information to decide when buying. It is very important because we lost track of how much things are worth“.

Thus, the official summarized that Care Prices “does not have to function as frozen prices, but as a reference scheme.”