He National Institute of Statistics and Censuses (INDEC) released this Wednesday the inflation data for August, which was 12.5% monthly and 124% year-on-year. Thus, 2023 accumulates a price increase level of 80.2% in the first eight months of the year. The category that rose the most was Food and drinkswhich registered a level of increases of 15.6% on averagefollowed by Health, with 15.3%. Why were those items the ones that increased the most?
Sebastian Menescaldieconomist and director of Eco Go, recognizes in dialogue with Ambit that the CPI data “was worse than expected” and warns that the Food and Beverages data, which contributed to the acceleration of prices for the month and increased in August almost 10 percentage points compared to July of this year, was seen driven, mainly, by an increase in the value of meat.
“What happens is that Food and drinks It is the most inelastic to price increases. You can stop going to a restaurant or the cinema for recreation. You can even review which medications are essential and which are not, given the need to adjust household spending, but eat, you have to eat every day“, points out the economist Christian Butler.
Although he explains that it is possible to lower the quality of the products purchased, as an adjustment variable, or go towards second brands, the truth is that these are also rising. That is why that group of products became so expensive. However, as stated, the main variable that drove the increase in food prices was meat.
Meat, a key variable for August inflation
This sharp jump in the value of meat occurred, according to Menescaldi, as a consequence of the devaluation of 22% that the Government applied after the PASO, on August 14, and also due to the effect of the corn dollar, which had a strong impact on livestock production costs, since the feed lots have corn as an essential input.
Consequently, as pointed out Claudio Caprarulodirector of Anlytica, states that “a jump in food and drinks It was already projected because the price of meat, which had been depressed to control the consequences of the drought” in the pockets of the population. However, he mentions that the price and that this dynamic in the flesh was even more affected after the devaluation.
Lorenzo Sigaut Gravina, head of Macroeconomics at Equilibra, points out along the same lines that “the wholesale price of meat “There was already a strong rise in the Cañuelas market before the devaluation and both effects were combined after August 14: the rise in wholesale values with the effect of the rise in the dollar.”
In fact, according to data from the Center for Political Economy (CEPA), the meat increased its value to 20% in the Treasury and counter towards the end of July due to the application of the corn dollar and Then one saw rise of 40% with the devaluation that took the official dollar to $350.
On the other hand, Menescaldi It mentions as an additional element that significant increases were recorded in vegetables. And that category of food, as reported by the INDEC, was located in the group of goods and services with seasonal behavior. That is, they tend to usually rise at this time of year due to issues of the relationship between production, supply and demand.
Thus, meat and its derivatives, according to the details of the INDECrose 25.6% in Greater Buenos Aires and Vegetables, Tubers and Legumes They increased 19.3%, while coffee, tea and cocoa increased 12.6% and bread and cereals rose 11.6%. “Those are the items that became most expensive last month within the food basket taken by the CPI,” he highlights. Fabio Rodriguezeconomist and director of MyR Asociados.
The strong jump in these and other isolated products resulted in a resounding increase of 15.6% overall monthly and 133.5% year-on-year, which, as economist Pablo Ferrari mentions, becomes even more worrying when one takes into account that the July increase in food had been below 6%standing at 5.8% monthly.
“They rose more than the rest because they have a lot of inputs tied to the dollar, the increase in gasoline affects the rise and increases in commodity prices as a result of the improvement in the exchange rate for exports as well,” says economist Federico Glustein.
Health: inputs increased very sharply
Regarding the health sector, meanwhile, the increase in August was 15.3%, as stated and is closely related to a rising prices of inputssince the item of Medicinal products, devices and equipment for health increased 20.8% in Greater Buenos Aires and spending on Prepaid increased 8.7% in that district the same month.
“Health responds to impact of devaluationwhich raised drug prices nationwide by 18.3%,” Menescaldi points out in this regard. To which Glustein adds that, in this area, the transfer to prices of the devaluation is almost direct due to the impact of the dollar on the costs, which are very high.
And in the case of inputs, the sharp increase is explained by the rising dollar for importersOn the one hand, as a result of the application of the PAIS tax to access the exchange rate to cancel this type of operations, which occurred within the framework of the Government’s decision to move towards a devaluation, which began in August.
Let us remember that many of the inputs used by the health and pharmaceutical industries are importedso it is logical that the jump in the exchange rate that was implemented has had a strong impact on the jump in their prices.
Consequently, the rise in inputs and prepaid payments combined to give a very impressive increase in the health sector in August. However, looking ahead, Sigaut Gravina points out that “the rise in prepaid payments was frozen starting in September”, so it is expected that the incidence of this item will be lower throughout the current month.
“However, areas such as health and food, which They have many dollarized inputsmay reflect, in the future, a carryover of the devaluation effect,” anticipates Glustein.
Source: Ambito
