The inflation in August it reached double digits, according to private consultants, after the devaluation post PASO and the jump in alternative dollars, and it is estimated that the trend will continue during September. This sharp rise in prices It directly impacts purchasing power and, consequently, consumption levels. That is why both private consulting firms and sector analysts project a contraction in domestic demand, which began to be observed in recent months and will continue in the near future. Although, they clarify, it is difficult to predict what may happen after the October elections.
For example, according to the Consumption Indicator of the Argentine Chamber of Commerce and Services (CAC), in July a decline of 1.6% was observed in the interannual comparison, implying a greater seasonally adjusted contraction of 1.8% compared to the month of June. Anywayaccumulated a growth of 2.9% in the first seven months compared to the same period in 2022. Although in the coming months this improvement could erode.
In a preview of what can be expected for other indicators in AugustCAME retail sales fell 4.1% in the year-on-year comparisonaccumulating a contraction for the eighth consecutive month, while the monthly variation saw a drop of 0.5%.
In that context, Julio Rodríguez Rabellinisenior economic analyst at the CAC economics department, told Ambit that the entity does not yet have the “closed data for August”, but estimates that ““The consumption indicator shows a more accelerated fall than in previous months.” “We have had year-on-year declines for two months and, from what we have heard, the price increase in August made sales quite difficult in recent weeks. And the expectation, given the double-digit inflation in August and taking into account that something similar is expected in September, this would result in a greater fall in real wages. So we do not see the possibility of an improvement in the short term,” he explained.
“We were thinking that the third quarter was going to be the most complicated in terms of consumption and economic activity, and this is being reflected,” said Rodríguez Rabellini, who when analyzing what can be expected for the near future, pointed out that “it is difficult to predict”: “Until it is clear what will happen after the October elections, the uncertainty is very greatand. If there is a second round, who would they be? If there is not, who will be elected president. In this scenario, we do not see an improvement in real consumption or activity in the short term.”
The CAC analyst also maintained that the measures adopted by the Government to mitigate the impact of inflation on consumption “they will not impact all workers”. “They are for lower-income people. But we are not going to see a strong impact on those who do not have a blank job. In addition, many companies have not yet defined whether the bonus will be absorbed in the joint ventures or not. But it will not imply a real improvement in consumption, It is a short-term palliative to sustain it”.
Precisely, when analyzing the Government’s measures, the consulting firm Sarandí pointed out that “the expansive policy to compensate for the devaluation can partially contain the deterioration of purchasing power, given the inflation of August.” After the October elections, they added, “Inflationary erosion is likely to accelerate again. What the next Government decides about the transfers for the month of December will be relevant.”
For their part, Ecolatina pointed out that “the impact of the devaluation after the PASO will have a recessionary effect on the real economy.” “It will have a negative impact on sectors of activity that until now had been relatively less affected (industry, construction, commerce), as a consequence of rising costs, moderation of consumption and a context of greater uncertainty and complications in the payment of imports,” the firm detailed in a study.
“Although the incidence of drought will fade from the third quarter, since August The negative effects of the rise in the dollar on the real economy and inflation began to impact. In more detail, payments for imports are being restricted again with greater intensity, added to the need to deepen the contractionary bias of fiscal and monetary policy, while a greater negative impact of the inflationary acceleration on income is noted,” they detailed.
In this scenario, the firm highlighted: “In a context in which accumulated inflation in August and September is expected to exceed 20%, The Government announced new compensation measures. These measures may have a palliative effect on the real income of households, but they will not be able to compensate for the economic recession in the last months of the year.”