Identifier
Created
Classification
Origin
06BUENOSAIRES912
2006-04-24 11:06:00
UNCLASSIFIED
Embassy Buenos Aires
Cable title:
MARCH 2006 INFLATION UPDATE AND PREDICTIONS
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UNCLAS BUENOS AIRES 000912
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: MARCH 2006 INFLATION UPDATE AND PREDICTIONS
REF: BUENOS AIRES 852
-------
SUMMARY
-------
UNCLAS BUENOS AIRES 000912
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: MARCH 2006 INFLATION UPDATE AND PREDICTIONS
REF: BUENOS AIRES 852
--------------
SUMMARY
--------------
1. The Consumer Price Index (CPI) rose 1.2 percent in
March. This brings the 12-month inflation rate to
11.1 percent. Clothing, Education, and Food and
Beverages were the three CPI components with the
highest monthly price rises in March, increasing 9.5
percent, 6.1 percent and 1.5 percent, respectively.
Average nominal salaries increased 1.0 percent in
February and the purchasing power of salaried workers
in February 2006 was 4.7 percent higher than in
February 2005. Official surveys put the percentage of
people living below the poverty line at 33.8 percent
in the second half of 2005, down from 38.5 percent in
the previous semester. The percentage of people
living below the destitution level declined to 12.2
percent during the second half of 2005, down from 13.6
percent in the previous semester. However, the peso
value of the poverty line and the destitution line
grew 1.3 percent and 1.7 respectively, in March.
According to the Central Bank's survey of market
expectations, CPI inflation is expected to be 0.8
percent in April, and 12.4 percent in 2006. End
Summary.
--------------
THE CONSUMER PRICE INDEX
--------------
2. The official Consumer Price Index (CPI) was 1.2
percent higher in March 2006 than in February 2006, as
predicted by the Central Bank's (BCRA) consensus
forecast. March inflation brought 12-month inflation
to 11.1 percent. Prices of Goods increased 1.7
percent and Prices of Services increased 0.5 percent
in March. Prices of goods that change depending on
the season decreased a monthly 0.5 percent, regulated
prices increased 0.2 percent, and the rest, which
constitutes "core inflation," increased 1.7 percent in
March. Core inflation was 12.5 percent between March
2005 and March 2006. The official CPI measures
inflation only in the Greater Buenos Aires urban area.
3. Clothing, Education, and Food and Beverages were
the three CPI components with the highest monthly
price rises in March, increasing 9.5 percent, 6.1
percent and 1.5 percent, respectively. Education was
the CPI component that increased the most between
March 2005 and March 2006, posting a 20.0 percent
increase. It was followed by Food and Beverages,
which rose 13.7 percent, and Clothing, which increased
12.6 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
MAR 1.2 1.7
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 March, the poverty line was ARP 859.95 (USD 280)
and the destitution line was
ARP 399.97 (USD 130). 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 1.3
percent in March, and rose 11.3 percent in the March
2005 - March 2006 period. The peso value of the
destitution line increased 1.8 percent in March, and
rose 12.8 percent in the March 2005-March 2006 period.
Thus, prices for essential food items consumed by the
poor increased more rapidly than for other items,
despite the GOA's increasing efforts to control food
prices.
6. The percentage of people living below the poverty
line was 33.8 percent in the 28 most important urban
areas of Argentina in the second half of 2005. The
percentage of the poor was 38.5 in the first half of
2005, and 40.2 percent in the second half of 2004.
The percentage of people living below the destitution
line was 12.2 percent in the 28 most important urban
areas in the second half of 2005. The percentage of
the destitute was 13.8 percent in the first half of
2005, and 15.0 percent in the second half of 2004.
The Embassy expects poverty and destitution to
continue to decline in 2006, but at an ever-decreasing
rate (see reftel).
--------------
AVERAGE NOMINAL SALARIES
--------------
7. INDEC estimated that average nominal salaries
increased 1.0 percent in February 2006 over January
2005. Inflation was 0.7 percent during that period.
The average nominal salary increase in February was
due to increases of 1.4 and 0.8 in formal and informal
private sector salaries, respectively, and no changes
in public sector salaries. Public sector salaries
mentioned here include salaries of federal and
provincial employees.
8. Average nominal salaries grew by 16.7 percent
between February 2005 and February 2006. This growth
was due to increases of 20.7, 17.6 and 7.1 percent in
formal private sector, informal private sector and
public sector salaries, respectively. Inflation in
the same period was 11.5 percent. Therefore, the
purchasing power of the average salaried worker in
February 2006 was on average 4.7 percent higher than
it was in February 2005. Both formal and informal
private sector salaries had significant gains of
purchasing power of 8.2 and 5.5 percent, respectively.
However, public sector salaries had a 4 percent
decline.
--------------
WHOLESALE PRICE INDEXES
--------------
9. The Wholesale Price Index (IPIM) decreased 0.6
percent during March 2006, bringing the total IPIM
increase since March 2005 to 11.0 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 0.6
percent decrease in March was due to a 4 percent
decline in Primary Product prices and a 0.7 percent
increase in Manufactured Goods. The decline in
Primary Products was largely the result of a 7.4
percent fall in Oil and Gas prices. Electric Power
prices did not change. Import prices increased 0.6
percent.
10. The Wholesale Basic Prices Index (IPIB) has the
same coverage as the IPIM, except that it excludes
taxes. The IPIB decreased 0.6 percent in March,
bringing the total IPIB increase since March 2005 to
11.5 percent. The 0.6 percent decrease in March was
due to a 3.9 percent decline in Primary Product prices
and a 0.7 percent increase in Manufactured Goods.
Electric Power prices did not change. Import prices
increased 0.6 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
decreased 0.6 percent in March 2006, bringing the
total IPP increase since March 2005 to 11.7 percent.
Primary Products decreased 4.1 percent and
Manufactured Goods increased 0.8 percent. Electric
Power prices did not change.
--------------
CONSTRUCTION COSTS
--------------
12. The INDEC index measuring private housing
construction costs in Greater Buenos Aires increased
1.0 percent in March 2006. These costs were 16.1
percent higher than in March 2005. The March increase
is the result of a 1.4 percent increase in materials,
a 0.5 percent rise in labor costs, and a 0.7 percent
increase in other construction costs. Wages of
salaried employees working for the sector increased
0.5 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 March, CPI
inflation is expected to be 0.8 percent in April, and
12.4 percent in 2006.
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: MARCH 2006 INFLATION UPDATE AND PREDICTIONS
REF: BUENOS AIRES 852
--------------
SUMMARY
--------------
1. The Consumer Price Index (CPI) rose 1.2 percent in
March. This brings the 12-month inflation rate to
11.1 percent. Clothing, Education, and Food and
Beverages were the three CPI components with the
highest monthly price rises in March, increasing 9.5
percent, 6.1 percent and 1.5 percent, respectively.
Average nominal salaries increased 1.0 percent in
February and the purchasing power of salaried workers
in February 2006 was 4.7 percent higher than in
February 2005. Official surveys put the percentage of
people living below the poverty line at 33.8 percent
in the second half of 2005, down from 38.5 percent in
the previous semester. The percentage of people
living below the destitution level declined to 12.2
percent during the second half of 2005, down from 13.6
percent in the previous semester. However, the peso
value of the poverty line and the destitution line
grew 1.3 percent and 1.7 respectively, in March.
According to the Central Bank's survey of market
expectations, CPI inflation is expected to be 0.8
percent in April, and 12.4 percent in 2006. End
Summary.
--------------
THE CONSUMER PRICE INDEX
--------------
2. The official Consumer Price Index (CPI) was 1.2
percent higher in March 2006 than in February 2006, as
predicted by the Central Bank's (BCRA) consensus
forecast. March inflation brought 12-month inflation
to 11.1 percent. Prices of Goods increased 1.7
percent and Prices of Services increased 0.5 percent
in March. Prices of goods that change depending on
the season decreased a monthly 0.5 percent, regulated
prices increased 0.2 percent, and the rest, which
constitutes "core inflation," increased 1.7 percent in
March. Core inflation was 12.5 percent between March
2005 and March 2006. The official CPI measures
inflation only in the Greater Buenos Aires urban area.
3. Clothing, Education, and Food and Beverages were
the three CPI components with the highest monthly
price rises in March, increasing 9.5 percent, 6.1
percent and 1.5 percent, respectively. Education was
the CPI component that increased the most between
March 2005 and March 2006, posting a 20.0 percent
increase. It was followed by Food and Beverages,
which rose 13.7 percent, and Clothing, which increased
12.6 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
MAR 1.2 1.7
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 March, the poverty line was ARP 859.95 (USD 280)
and the destitution line was
ARP 399.97 (USD 130). 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 1.3
percent in March, and rose 11.3 percent in the March
2005 - March 2006 period. The peso value of the
destitution line increased 1.8 percent in March, and
rose 12.8 percent in the March 2005-March 2006 period.
Thus, prices for essential food items consumed by the
poor increased more rapidly than for other items,
despite the GOA's increasing efforts to control food
prices.
6. The percentage of people living below the poverty
line was 33.8 percent in the 28 most important urban
areas of Argentina in the second half of 2005. The
percentage of the poor was 38.5 in the first half of
2005, and 40.2 percent in the second half of 2004.
The percentage of people living below the destitution
line was 12.2 percent in the 28 most important urban
areas in the second half of 2005. The percentage of
the destitute was 13.8 percent in the first half of
2005, and 15.0 percent in the second half of 2004.
The Embassy expects poverty and destitution to
continue to decline in 2006, but at an ever-decreasing
rate (see reftel).
--------------
AVERAGE NOMINAL SALARIES
--------------
7. INDEC estimated that average nominal salaries
increased 1.0 percent in February 2006 over January
2005. Inflation was 0.7 percent during that period.
The average nominal salary increase in February was
due to increases of 1.4 and 0.8 in formal and informal
private sector salaries, respectively, and no changes
in public sector salaries. Public sector salaries
mentioned here include salaries of federal and
provincial employees.
8. Average nominal salaries grew by 16.7 percent
between February 2005 and February 2006. This growth
was due to increases of 20.7, 17.6 and 7.1 percent in
formal private sector, informal private sector and
public sector salaries, respectively. Inflation in
the same period was 11.5 percent. Therefore, the
purchasing power of the average salaried worker in
February 2006 was on average 4.7 percent higher than
it was in February 2005. Both formal and informal
private sector salaries had significant gains of
purchasing power of 8.2 and 5.5 percent, respectively.
However, public sector salaries had a 4 percent
decline.
--------------
WHOLESALE PRICE INDEXES
--------------
9. The Wholesale Price Index (IPIM) decreased 0.6
percent during March 2006, bringing the total IPIM
increase since March 2005 to 11.0 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 0.6
percent decrease in March was due to a 4 percent
decline in Primary Product prices and a 0.7 percent
increase in Manufactured Goods. The decline in
Primary Products was largely the result of a 7.4
percent fall in Oil and Gas prices. Electric Power
prices did not change. Import prices increased 0.6
percent.
10. The Wholesale Basic Prices Index (IPIB) has the
same coverage as the IPIM, except that it excludes
taxes. The IPIB decreased 0.6 percent in March,
bringing the total IPIB increase since March 2005 to
11.5 percent. The 0.6 percent decrease in March was
due to a 3.9 percent decline in Primary Product prices
and a 0.7 percent increase in Manufactured Goods.
Electric Power prices did not change. Import prices
increased 0.6 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
decreased 0.6 percent in March 2006, bringing the
total IPP increase since March 2005 to 11.7 percent.
Primary Products decreased 4.1 percent and
Manufactured Goods increased 0.8 percent. Electric
Power prices did not change.
--------------
CONSTRUCTION COSTS
--------------
12. The INDEC index measuring private housing
construction costs in Greater Buenos Aires increased
1.0 percent in March 2006. These costs were 16.1
percent higher than in March 2005. The March increase
is the result of a 1.4 percent increase in materials,
a 0.5 percent rise in labor costs, and a 0.7 percent
increase in other construction costs. Wages of
salaried employees working for the sector increased
0.5 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 March, CPI
inflation is expected to be 0.8 percent in April, and
12.4 percent in 2006.
14. To see more Buenos Aires reporting, visit our
classified website at:
http://www.state.sgov.gov/p/wha/buenosaires
GUTIERREZ