MercoPress. South Atlantic News Agency

Argentina's Indec says May's CPI reached 4.2%

Minister Caputo celebrated what he deemed to be another achievement in curbing inflation

Argentina's National Institute of Statistics and Census (Indec) announced Thursday that the Consumer Price Index (CPI) had grown 4.2% in May, which was celebrated by the Libertarian administration of President Javier Milei as another sign of a slow victory over inflation despite the 71.9% recorded in the first five months of 2024 and the 276.4% yoy.

 May's figures were thus less than half of April's 8.8% and the lowest since January 2022. The division with the highest monthly increase was Communication (8.2%) and the lowest was Healthcare (0.7%).

However, a slight rebound is projected for the coming months given a sharp increase in utilities following the removal of State subsidies.

This “drop is fundamental for the recovery, this generates a normality that you have not seen in Argentina for a long time,” Economy Minister Luis Toto Caputo argued.

Behind Communications came Education (7.6%), followed by Alcoholic beverages and tobacco (6.7%) and Food and non-alcoholic beverages (4.8%), driven by increases in vegetables, tubers and legumes, milk and dairy products, eggs, and oils, fats, and butter. Electricity and other fuels went up 2.5%.

The Central Bank's (BCRA) Market Expectations Outlook (Relevamiento de Expectativas de Mercado - REM) based on estimates from leading economists had foreseen May's inflation to reach 5.2% for a total of 146.4% by the end of the year, which represented an improvement from last month's 161.3% forecast.

Last week, the official index for the City of Buenos Aires, which usually heralds the nationwide figures, had been determined to stand at 4.4% in May, the lowest since February 2022, yielding an interannual figure of 280.9%.

Thursday's Indec results were achieved at the expense of a sharp drop in economic activity resulting in a strong recession and low consumption after the strong devaluation of the Argentine peso when the Libertarians took over in December of 2023.

In this scenario, the International Monetary Fund (IMF) said Argentina was “on track” after meeting all goals for the first quarter of 2024 and approved a US$ 800 million disbursement to “support the efforts of the authorities to strengthen the process of disinflation, rebuild fiscal and external reserves and shore up the recovery.”

Still, the IMF warned that “to maintain progress it is necessary to improve the quality of fiscal adjustment, take the first steps towards an improved monetary and exchange rate policy framework, and implement reforms to unlock growth, formal employment, and investment.”

At the same time, an extension of a currency swap with China worth US$ 5 billion was granted, thus saving Buenos Aires from maturities due this month and the next.