Tariff effect: services inflation again exceeded goods inflation, what is expected for September?

This Wednesday the INDEC reported that Inflation accelerated to 4.2% in Augustwhen most analysts expected a figure somewhat below 4%. Services rose again above goods, a trend that would deepen in Septemberaccording to analysts.

Official data showed that the goods division showed a variation of 3.2% compared to July, while the services division rose 6.5%. Within this second group, the increases in Housing, Transport, Communications and Restaurants and Hotels. These four categories accounted for 1.8 of the 4.2 points of inflationaccording to the consulting firm CP.

It should also be noted that Most of the adjustments in these services corresponded to variations in regulated prices, as was the case with rent, electricity and gas rates, and public transport tickets in the Metropolitan Area of ​​Buenos Aires (AMBA).

Change in the price relationship between goods and services

Between September 2023 and January 2024, goods had increased strongly above servicesin a context of frozen rates, to which was added the devaluation of December, which had a greater impact on the price of food.

The gap narrowed considerably from February onwards, and the trend was reversed in June. Indeed, In August, the annual inflation of services exceeded that of goods for the third consecutive month; in this case, the difference was 36 percentage points (263.9% vs 227.3%).

PAIS tax and new increases in regulated items: impact in September

“Given the accumulated lag in services in recent years, This trend is likely to continue in the months ahead, presenting a challenging outlook that is unlikely to keep monthly inflation from 4% as recorded since May of this year,” warned the consultancy ACM in a report.

“Looking ahead, The reduction of the PAIS tax, together with the rate increases in September, reinforce the observed dynamics“The prices of goods are rising at a slower pace than those of services,” the firm noted.

With a similar vision, In CP, they estimated a slowdown in general inflation in the first two weeks of September, which they attributed in part to the drop in the PAIS taxwhich reduces the cost of imported goods. In the same sense, they identified a greater calm in the price of food and beverages, with seven of the nine categories almost unchanged in the second week (only strong increases were observed in fruits and beverages).

Even so, They clarified that the effect of the PAIS tax is temporary and that “the indexation mechanisms of the economy are still present in the price dynamics.”

For its part, the LCG consultancy does not see the lower rate of this tax generating a significant impact on the Consumer Price Index (CPI) for September. On the contrary, they do foresee greater pressure coming from new increases in regulated prices such as those of gasoline, prepaid medical plans, electricity and gas, and trains in the AMBA. In this framework, they expect the CPI to rise again by around 4% this month.