Argentina’s consumer price index remains outdated, prompting calls for reform to reflect contemporary spending habits and potential underreported inflation rates. Economists anticipate that updated metrics could reveal higher inflation than the current estimate of 2.5 percent. Although INDEC has acknowledged the need for change, no actions have been taken, causing public skepticism and urging action from President Milei amidst the approaching midterm elections.
In Argentina, the consumer price index (CPI) remains largely outdated, featuring items like newspapers and landline phones, which no longer reflect modern purchasing behavior. Consequently, there is increasing pressure on President Javier Milei to overhaul the CPI for the first time in twenty years, replacing obsolete items with contemporary essentials such as smartphones and streaming subscriptions.
Most economists anticipate that an updated CPI would indicate inflation rates exceeding the current monthly figure of approximately 2.5 percent. Research has shown higher inflation rates in studies from cities and provinces compared to national numbers. Moreover, the head of the National Institute of Statistics and Census of Argentina (INDEC) has acknowledged the index requires reform; however, no actions have been taken six months following that admission.
For President Milei and his economic team, any potential adjustments could be politically risky, particularly with upcoming midterm elections in October. Currently, figures on inflation present Milei favorably, as the annual rate plummeted from 276.2 percent a year earlier to 66.9 percent in February. Alterations to the CPI could jeopardize this perceived success, as it might lead to escalated inflation-linked bond payouts, a critical financing strategy for the government.
Public sentiment remains skeptical of official inflation statistics, largely due to a past scandal involving the underreporting of consumer price increases by INDEC. Many citizens believe that while inflation is decreasing, prices continue to rise rapidly. Ángel Santos, a Buenos Aires building superintendent, reflects this perception, stating, “Inflation is going down, but prices keep rising,” highlighting the burdensome cost increases on essential goods and services.
A recent Atlas Intel poll reveals that high prices are still a primary concern for many Argentines, with 42 percent of respondents identifying inflation as the most pressing issue. Labor unions argue that actual inflation rates might be between 10 to 22 percentage points higher than reported figures. In September, INDEC’s Director Marco Lavagna announced plans to update the CPI basket, although there have been delays.
Additionally, there is a significant underrepresentation of services within the CPI. While food and utilities carry a substantial weight, crucial services such as healthcare, education, and digital subscriptions do not reflect actual spending patterns. Economist Mariana González noted a shift in Argentine consumption towards services over food, emphasizing the need for a balanced approach in the index calculation.
Under Milei’s administration, certain services such as rentals and mobile phone costs have increased significantly more than grocery prices, yet these categories are allocated less weight in the CPI. Accordingly, INDEC data has shown a 240 percent hike in rental costs and nearly 100 percent for internet services compared to the previous year, underscoring the disparity in representation within the index.
Lavagna proposed a comprehensive overhaul to the methodology used in inflation measurement by increasing the sample size of prices analyzed and updating the weighting of goods to better represent current consumption habits. However, this reform has not progressed, and analysts caution that without updating the CPI, official inflation data will not accurately reflect economic realities in Argentina.
In conclusion, the outdated consumer price index in Argentina fails to accurately capture current economic conditions, highlighting a growing disparity between reported and actual inflation rates. President Milei faces potential political repercussions as calls for reform escalate, particularly with upcoming elections. The underrepresentation of essential services in the CPI, coupled with lingering public skepticism towards official statistics, emphasizes the urgent need for a comprehensive update to reflect modern consumer behaviors and economic realities.
Original Source: www.batimes.com.ar
