Businessmen’s inflation expectations continue to be above the government’s target

Businessmen’s inflation expectations continue to be above the government’s target

The entrepreneurs of Uruguay maintained their inflation projections at an average of 8.4% for this 2023, according to the latest Business Expectations Survey (EEA), which places the forecasts well above the target range of the BCU, established between 3% and 6%.

Despite the current difference, the private sector reduced a 0.1% inflationary expectations, since last month they estimated that the year would close with an 8.5% rise in the cost of living. The reduction in the survey carried out by the INE It is correlated with the latest CPI data, which slowed down and closed at 7.1% year-on-year.

In turn, in the business field they maintained the 8.4% of inflationary expectations for the rolling year ending in March 2024, but they also reduced the inflation expected for the rolling year ending in March 2025 by 0.1%, since they calculate that it will be 8.3%

On the other hand, businessmen showed a decrease of 0.2% in the expected variation of their operating costs for this year, closing at 9% However, in the accumulated April 2023-March 2024, they located the costs in 9.2%, an increase of 0.1%. For the period between April 2024 and 2025, meanwhile, there was a drop of 0.1%, placing expectations at 9%.

Expectations, far from the CPI, which fell to 7.1% year-on-year

What was expected by businessmen is far from peak of 8.8% inflation that they projected in November, although it is also far from the latest value of the CPI, where the INE reported a decline that placed it at 7.1% year-on-year. To achieve this decrease, the fall in the prices of “Food and Non-Alcoholic Beverages” was key, which fell by 0.54%. In fact, among the foods that fell the most, the category of fruits and nutswith a overall drop of 7.67%with the oranges to the head, falling 30.26%.

The data, which was released days ago, showed that there was a slight month-on-month drop of 0.01% and thus accumulates an increase of 4.26% so far this year. In addition, it represented a return to the downward path, after the rise in April, which brought inflation to 7.6% in the last moving year.

The reserves of economic and financial agents on inflation

It is worth remembering that for May there were certain reservations in the expectations among economic and financial agents that the Central Bank of Uruguay periodically relieves to feel the climate of the market. In fact, the last BCU Economic Expectations Survey showed that they expected a median of 0.5% inflation for Maywith a minimum of 0.2 and a maximum of 0.7%, data that differs with the drop of 0.01% registered.

According to the data collected in the BCU newsletter entitled “Evolution of prices and inflation expected by agents”, the markets expected inflation to escalate up to 9.05% year-on-year during the second quarter of 2024, which would imply reaching historic levels, similar to those registered during the pandemic.

Source: Ambito

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