Identifier
Created
Classification
Origin
06BUENOSAIRES592
2006-03-14 12:47:00
UNCLASSIFIED
Embassy Buenos Aires
Cable title:
FEBRUARY 2006 INFLATION UPDATE AND
how-toVZCZCXYZ0000 RR RUEHWEB DE RUEHBU #0592/01 0731247 ZNR UUUUU ZZH R 141247Z MAR 06 FM AMEMBASSY BUENOS AIRES TO RUEHC/SECSTATE WASHDC 3808 INFO RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/USDOC WASHDC RUEHRC/USDA FAS WASHDC 2108 RUEHC/DEPT OF LABOR WASHDC RHMFISS/HQ USSOUTHCOM MIAMI FL RUEHAC/AMEMBASSY ASUNCION 5415 RUEHMN/AMEMBASSY MONTEVIDEO 5397 RUEHSG/AMEMBASSY SANTIAGO 5016 RUEHBR/AMEMBASSY BRASILIA 5202 RUEHSO/AMCONSUL SAO PAULO 2804 RUEHRI/AMCONSUL RIO DE JANEIRO 1907
UNCLAS BUENOS AIRES 000592
SIPDIS
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI
PASS USTR FOR LESLIE YANG
TREASURY FOR RAMIN TOLOUI AND CHRIS KUSHLIS AND OCC
FOR CARLOS HERNANDEZ
USDOC FOR ALEXANDER PREACHER
USDOL FOR ILAB PAULA CHURCH AND ROBERT WHOLEY
SOUTHCOM FOR POLAD AND J5 FOR JUAN RENTA
SIPDIS
E.O. 12958: N/A
TAGS: EFIN ECON ELAB ETRD ALOWAR
SUBJECT: FEBRUARY 2006 INFLATION UPDATE AND
PREDICTIONS
-------
SUMMARY
-------
UNCLAS BUENOS AIRES 000592
SIPDIS
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI
PASS USTR FOR LESLIE YANG
TREASURY FOR RAMIN TOLOUI AND CHRIS KUSHLIS AND OCC
FOR CARLOS HERNANDEZ
USDOC FOR ALEXANDER PREACHER
USDOL FOR ILAB PAULA CHURCH AND ROBERT WHOLEY
SOUTHCOM FOR POLAD AND J5 FOR JUAN RENTA
SIPDIS
E.O. 12958: N/A
TAGS: EFIN ECON ELAB ETRD ALOWAR
SUBJECT: FEBRUARY 2006 INFLATION UPDATE AND
PREDICTIONS
--------------
SUMMARY
--------------
1. The Consumer Price Index (CPI) rose 0.4 percent in
February. This brings the 12-month inflation rate to
11.5 percent. Food and Beverages, and Medical and
Health Care Services were the two CPI components with
the highest monthly price rise in February, even
though the GOA had launched price control measures for
food, beverages and medicines. Average nominal
salaries increased 1.7 percent in January and the
purchasing power of salaried workers in January 2006
was 5.3 percent higher than in January 2005. Official
surveys put the percentage of people living below the
poverty line at 38.5 percent in the first half of
2005, down from 40.2 percent in the previous semester.
The percentage of people living below the destitution
level dropped to 13.6 percent during the first half of
2005, down from 15.0 percent in the previous semester.
However, the peso value of the poverty line and the
destitution line grew 0.6 percent and 1.1
respectively, in February. According to the Central
Bank's survey of market expectations, whose
methodology changed recently, CPI inflation is
expected to be 1.2 percent in March, and 12.9 percent
in 2006. End Summary.
--------------
THE CONSUMER PRICE INDEX
--------------
2. The official Consumer Price Index (CPI) was 0.4
percent higher in February 2006 than in January 2006,
well below the Central Bank's (BCRA) consensus
forecast of 0.9 percent. February inflation brought
12-month inflation to 11.5 percent. Prices of Goods
increased 0.5 percent and Prices of Services increased
0.3 percent in February. Prices of goods that change
depending on the season decreased a monthly 1.1
percent, regulated prices remained unchanged and the
rest, which constitutes "core inflation," increased
0.7 percent in February. In other words, seasonal
price declines in February overshadowed a continued
rise in core inflation during the same month. Core
inflation was 13.1 percent between February 2005 and
February 2006. The official CPI measures inflation
only in the Greater Buenos Aires urban area.
3. Food and Beverages, and Medical and Health Care
Services were the two CPI components with the highest
monthly price rise in February, 1.0 percent, even
though the GOA had launched price control measures for
food, beverages and medicines. These items were
followed by Housing Equipment and Maintenance, whose
prices increased 0.8 percent. Education was the CPI
component that increased the most between February
2005 and February 2006, posting a 16.1 percent
increase. It was followed by Food and Beverages,
which rose 15.0 percent, and Clothing, which increased
12.2 percent.
TABLE I
CONSUMER PRICE INDEX (1999 = 100)
CPI PCT CHG CORE INFLATION
YEAR PREV YR PCT CH PREV YR
2001 -1.5 n.a.
2002 41.0 n.a.
2003 3.7 n.a.
2004 6.1 6.4
2005 12.3 14.2
CPI PCT CHG CORE INFLATION
PREV MO PCT CH PREV MO
2005
JAN 1.5 1.1
FEB 1.0 1.3
MAR 1.5 2.2
APR 0.5 0.8
MAY 0.6 0.6
JUN 0.9 1.1
JUL 1.0 1.0
AUG 0.4 0.9
SEP 1.2 0.9
OCT 0.8 0.7
NOV 1.2 1.4
DEC 1.1 1.4
2006
JAN 1.3 0.7
FEB 0.4 0.7
Source: National Bureau of Statistics and Census
(INDEC).
--------------
POVERTY AND DESTITUTION LEVELS
--------------
4. INDEC publishes a monthly estimate of the value of
a "total consumption basket" and a "food consumption
basket." These baskets are based on estimates of the
minimum nutritional requirements and other consumption
habits of people of different ages. These estimates
determine the official poverty line and the official
destitution line, respectively. For a family of four
in February, the poverty line was ARP 848.92 (USD 277)
and the destitution line was
ARP 393.02 (USD 128). A family of four is defined as
a man and a woman in their thirties, an eight-year-old
girl and a five-year-old boy.
5. The peso value of the poverty line grew 0.6
percent in February, and rose 11.6 percent in the
February 2005 - February 2006 period. The peso value
of the destitution line increased 1.1 percent in
February, and rose 14.2 percent in the February 2005-
February 2006 period.
6. The percentage of people living below the poverty
line was 38.5 percent in the 28 most important urban
areas of Argentina in the first half of 2005. The
percentage of the poor was 40.2 in the second half of
2004, and 44.3 percent in the first half of 2004. The
percentage of people living below the destitution line
was 13.6 percent in the 28 most important urban areas
in the first half of 2005. The percentage of the
destitute was 15.0 in the second half of 2004, and
17.0 percent in the first half of 2004. INDEC will
release an update on poverty in Argentina on March 20
wherein the poverty and destitution levels are
expected to decline.
--------------
AVERAGE NOMINAL SALARIES
--------------
7. INDEC estimated that average nominal salaries
increased 1.7 percent in January 2006 over December
2005. Inflation was 1.3 percent during that period.
The average nominal salary increase in January was due
to increases of 1.5, 4.1 and 0.6 percent in formal
private sector, informal private sector and public
sector salaries, respectively. Public sector salaries
mentioned here include salaries of federal and
provincial employees. Informal private sector
salaries increased at a higher rate as the demand for
labor increased and informal private sector salaries
began to catch up with earlier increases in formal
private sector salaries.
8. Average nominal salaries grew by 18.0 percent
between January 2005 and January 2006. This growth
was due to increases of 21.2, 16.0 and 11.8 percent in
formal private sector, informal private sector and
public sector salaries, respectively. Inflation in
the same period was 12.1 percent. Therefore, the
purchasing power of the average salaried worker in
January 2006 was on average 5.3 percent higher than it
was in January 2005. However, it was only formal
private sector workers who posted a significant 8.2
percent gain in real salaries.
--------------
WHOLESALE PRICE INDEXES
--------------
9. The Wholesale Price Index (IPIM) increased 1.4
percent during February 2006, bringing the total IPIM
increase since February 2005 to 13.5 percent. This
index measures the price changes of national products
(including Primary Products and Manufactured Goods and
Electric Power) and imports sold in the domestic
market. The IPIM also includes taxes. The 1.4
percent increase in February was due to a 3.3 percent
increase in Primary Product prices and a 0.6 percent
increase in Manufactured Goods. The increase in
Primary Products is largely the result of a 4.7
percent increase in Oil and Gas prices. Electric
Power prices increased 1.1 percent. Import prices
increased 1.4 percent.
10. The Wholesale Basic Prices Index (IPIB) has the
same coverage as the IPIM, except that it excludes
taxes. The IPIB increased 1.4 percent in February,
bringing the total IPIB increase since February 2005
to 14.2 percent. The 1.4 percent increase in February
was due to a 3.3 percent increase in Primary Product
prices and a 0.7 percent increase in Manufactured
Goods. Electric Power prices increased 1.1 percent.
Import prices increased 1.4 percent.
11. The prices for the sectors measured in the IPIM
and IPIB are weighted using the corresponding value of
product net of exports. INDEC has devised another
index, the Basic Prices to Producers Index (IPP),
whose weights are calculated considering sales in the
internal market as much as sales to the external
market and excluding imports and taxes. The IPP
increased 1.3 percent in February 2006, bringing the
total IPP increase since February 2005 to 14.6
percent. Primary Products increased 3.3 percent and
Manufactured Goods increased 0.6 percent. Electric
Power prices increased 1.1 percent.
--------------
CONSTRUCTION COSTS
--------------
12. The INDEC index measuring private housing
construction costs in Greater Buenos Aires increased
1.0 percent in February 2006. These costs were 19.0
percent higher than in February 2005. The February
increase is the result of a 1.2 percent increase in
materials, 0.8 percent rise in labor costs, and a 0.7
percent increase in other construction costs. Wages
of salaried employees working for the sector increased
0.9 percent and payments to the self-employed grew 0.8
percent. Professional fees are not included among the
labor costs considered by INDEC in the construction
sector.
--------------
INFLATION PREDICTIONS FOR 2006
--------------
13. The GOA's national budget includes a 9.1 percent
inflation forecast for 2006. The BCRA monetary
program for 2006 announced on December 29, 2005,
established an inflation target of between 8-11
percent for 2006. According to the BCRA's last survey
of market expectations published on February, CPI
inflation is expected to be 1.2 percent in March, and
12.9 percent in 2006. Some analysts believe that this
rate could be even higher, given the unexpectedly high
increase in beef prices during the first part of the
month.
14. To see more Buenos Aires reporting, visit our
classified website at:
http://www.state.sgov.gov/p/wha/buenosaires
GUTIERREZ
SIPDIS
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI
PASS USTR FOR LESLIE YANG
TREASURY FOR RAMIN TOLOUI AND CHRIS KUSHLIS AND OCC
FOR CARLOS HERNANDEZ
USDOC FOR ALEXANDER PREACHER
USDOL FOR ILAB PAULA CHURCH AND ROBERT WHOLEY
SOUTHCOM FOR POLAD AND J5 FOR JUAN RENTA
SIPDIS
E.O. 12958: N/A
TAGS: EFIN ECON ELAB ETRD ALOWAR
SUBJECT: FEBRUARY 2006 INFLATION UPDATE AND
PREDICTIONS
--------------
SUMMARY
--------------
1. The Consumer Price Index (CPI) rose 0.4 percent in
February. This brings the 12-month inflation rate to
11.5 percent. Food and Beverages, and Medical and
Health Care Services were the two CPI components with
the highest monthly price rise in February, even
though the GOA had launched price control measures for
food, beverages and medicines. Average nominal
salaries increased 1.7 percent in January and the
purchasing power of salaried workers in January 2006
was 5.3 percent higher than in January 2005. Official
surveys put the percentage of people living below the
poverty line at 38.5 percent in the first half of
2005, down from 40.2 percent in the previous semester.
The percentage of people living below the destitution
level dropped to 13.6 percent during the first half of
2005, down from 15.0 percent in the previous semester.
However, the peso value of the poverty line and the
destitution line grew 0.6 percent and 1.1
respectively, in February. According to the Central
Bank's survey of market expectations, whose
methodology changed recently, CPI inflation is
expected to be 1.2 percent in March, and 12.9 percent
in 2006. End Summary.
--------------
THE CONSUMER PRICE INDEX
--------------
2. The official Consumer Price Index (CPI) was 0.4
percent higher in February 2006 than in January 2006,
well below the Central Bank's (BCRA) consensus
forecast of 0.9 percent. February inflation brought
12-month inflation to 11.5 percent. Prices of Goods
increased 0.5 percent and Prices of Services increased
0.3 percent in February. Prices of goods that change
depending on the season decreased a monthly 1.1
percent, regulated prices remained unchanged and the
rest, which constitutes "core inflation," increased
0.7 percent in February. In other words, seasonal
price declines in February overshadowed a continued
rise in core inflation during the same month. Core
inflation was 13.1 percent between February 2005 and
February 2006. The official CPI measures inflation
only in the Greater Buenos Aires urban area.
3. Food and Beverages, and Medical and Health Care
Services were the two CPI components with the highest
monthly price rise in February, 1.0 percent, even
though the GOA had launched price control measures for
food, beverages and medicines. These items were
followed by Housing Equipment and Maintenance, whose
prices increased 0.8 percent. Education was the CPI
component that increased the most between February
2005 and February 2006, posting a 16.1 percent
increase. It was followed by Food and Beverages,
which rose 15.0 percent, and Clothing, which increased
12.2 percent.
TABLE I
CONSUMER PRICE INDEX (1999 = 100)
CPI PCT CHG CORE INFLATION
YEAR PREV YR PCT CH PREV YR
2001 -1.5 n.a.
2002 41.0 n.a.
2003 3.7 n.a.
2004 6.1 6.4
2005 12.3 14.2
CPI PCT CHG CORE INFLATION
PREV MO PCT CH PREV MO
2005
JAN 1.5 1.1
FEB 1.0 1.3
MAR 1.5 2.2
APR 0.5 0.8
MAY 0.6 0.6
JUN 0.9 1.1
JUL 1.0 1.0
AUG 0.4 0.9
SEP 1.2 0.9
OCT 0.8 0.7
NOV 1.2 1.4
DEC 1.1 1.4
2006
JAN 1.3 0.7
FEB 0.4 0.7
Source: National Bureau of Statistics and Census
(INDEC).
--------------
POVERTY AND DESTITUTION LEVELS
--------------
4. INDEC publishes a monthly estimate of the value of
a "total consumption basket" and a "food consumption
basket." These baskets are based on estimates of the
minimum nutritional requirements and other consumption
habits of people of different ages. These estimates
determine the official poverty line and the official
destitution line, respectively. For a family of four
in February, the poverty line was ARP 848.92 (USD 277)
and the destitution line was
ARP 393.02 (USD 128). A family of four is defined as
a man and a woman in their thirties, an eight-year-old
girl and a five-year-old boy.
5. The peso value of the poverty line grew 0.6
percent in February, and rose 11.6 percent in the
February 2005 - February 2006 period. The peso value
of the destitution line increased 1.1 percent in
February, and rose 14.2 percent in the February 2005-
February 2006 period.
6. The percentage of people living below the poverty
line was 38.5 percent in the 28 most important urban
areas of Argentina in the first half of 2005. The
percentage of the poor was 40.2 in the second half of
2004, and 44.3 percent in the first half of 2004. The
percentage of people living below the destitution line
was 13.6 percent in the 28 most important urban areas
in the first half of 2005. The percentage of the
destitute was 15.0 in the second half of 2004, and
17.0 percent in the first half of 2004. INDEC will
release an update on poverty in Argentina on March 20
wherein the poverty and destitution levels are
expected to decline.
--------------
AVERAGE NOMINAL SALARIES
--------------
7. INDEC estimated that average nominal salaries
increased 1.7 percent in January 2006 over December
2005. Inflation was 1.3 percent during that period.
The average nominal salary increase in January was due
to increases of 1.5, 4.1 and 0.6 percent in formal
private sector, informal private sector and public
sector salaries, respectively. Public sector salaries
mentioned here include salaries of federal and
provincial employees. Informal private sector
salaries increased at a higher rate as the demand for
labor increased and informal private sector salaries
began to catch up with earlier increases in formal
private sector salaries.
8. Average nominal salaries grew by 18.0 percent
between January 2005 and January 2006. This growth
was due to increases of 21.2, 16.0 and 11.8 percent in
formal private sector, informal private sector and
public sector salaries, respectively. Inflation in
the same period was 12.1 percent. Therefore, the
purchasing power of the average salaried worker in
January 2006 was on average 5.3 percent higher than it
was in January 2005. However, it was only formal
private sector workers who posted a significant 8.2
percent gain in real salaries.
--------------
WHOLESALE PRICE INDEXES
--------------
9. The Wholesale Price Index (IPIM) increased 1.4
percent during February 2006, bringing the total IPIM
increase since February 2005 to 13.5 percent. This
index measures the price changes of national products
(including Primary Products and Manufactured Goods and
Electric Power) and imports sold in the domestic
market. The IPIM also includes taxes. The 1.4
percent increase in February was due to a 3.3 percent
increase in Primary Product prices and a 0.6 percent
increase in Manufactured Goods. The increase in
Primary Products is largely the result of a 4.7
percent increase in Oil and Gas prices. Electric
Power prices increased 1.1 percent. Import prices
increased 1.4 percent.
10. The Wholesale Basic Prices Index (IPIB) has the
same coverage as the IPIM, except that it excludes
taxes. The IPIB increased 1.4 percent in February,
bringing the total IPIB increase since February 2005
to 14.2 percent. The 1.4 percent increase in February
was due to a 3.3 percent increase in Primary Product
prices and a 0.7 percent increase in Manufactured
Goods. Electric Power prices increased 1.1 percent.
Import prices increased 1.4 percent.
11. The prices for the sectors measured in the IPIM
and IPIB are weighted using the corresponding value of
product net of exports. INDEC has devised another
index, the Basic Prices to Producers Index (IPP),
whose weights are calculated considering sales in the
internal market as much as sales to the external
market and excluding imports and taxes. The IPP
increased 1.3 percent in February 2006, bringing the
total IPP increase since February 2005 to 14.6
percent. Primary Products increased 3.3 percent and
Manufactured Goods increased 0.6 percent. Electric
Power prices increased 1.1 percent.
--------------
CONSTRUCTION COSTS
--------------
12. The INDEC index measuring private housing
construction costs in Greater Buenos Aires increased
1.0 percent in February 2006. These costs were 19.0
percent higher than in February 2005. The February
increase is the result of a 1.2 percent increase in
materials, 0.8 percent rise in labor costs, and a 0.7
percent increase in other construction costs. Wages
of salaried employees working for the sector increased
0.9 percent and payments to the self-employed grew 0.8
percent. Professional fees are not included among the
labor costs considered by INDEC in the construction
sector.
--------------
INFLATION PREDICTIONS FOR 2006
--------------
13. The GOA's national budget includes a 9.1 percent
inflation forecast for 2006. The BCRA monetary
program for 2006 announced on December 29, 2005,
established an inflation target of between 8-11
percent for 2006. According to the BCRA's last survey
of market expectations published on February, CPI
inflation is expected to be 1.2 percent in March, and
12.9 percent in 2006. Some analysts believe that this
rate could be even higher, given the unexpectedly high
increase in beef prices during the first part of the
month.
14. To see more Buenos Aires reporting, visit our
classified website at:
http://www.state.sgov.gov/p/wha/buenosaires
GUTIERREZ