Argentine inflation spiked for both regulated and core price items

We expect consumer prices to climb 20% this year, above the inflation target of 15%.

Talk of the Day


Adjustments in electricity tariffs, transportation fares, fuel and medical services pushed headline inflation up in February. Consumer prices rose 2.4% from January to February, slightly below market expectations of 2.45% (according to a Bloomberg survey). The reading showed an acceleration from the previous month (1.8% mom), taking 12-month inflation to 25.4% in February (from 25.0% in January). Core items rose by 2.1% mom, marking the highest reading since April of last year. The year-over-year reading rose to 21.6% yoy from 21.1% in January. Regulated prices rose 4.8% during the month and 40.2% yoy, while the prices of items affected by seasonality fell by 0.7% mom (21.0% yoy).

We expect the inflation environment to remain challenging in coming months, in particular due to a scheduled increase in gas and transportation tariffs in April, amid wage negotiations. Not surprisingly, the central bank kept its reference rate unchanged, at 27.25%. In addition, it has intervened in the exchange market to prevent further weakening of the Peso. We expect consumer prices to climb 20% this year, above the inflation target of 15%. ** Full Story here.


Activity at the start of 2018 came in mixed, with industrial production posting mild growth, while retail sales surprised to the upside led by car and telecommunications equipment. In the month of January, total retail sales increased 6.2% yoy (-3.7% previously), above the Bloomberg market consensus of 1.2% and our 1.5% forecast. Car and motorcycle sales printed at 26.0% (versus -27.2% in December). This came as a surprise considering private industry numbers pointed at continued contraction. This component added 2.7 percentage points to the total retail sales gain. Once vehicle and fuel sales are excluded, retail posted sales growth 3.9% (0.4% in December), boosted by the 25.9% increase in personal-use telecommunication equipment (16% previously). The main drag in the month came from newspaper and book sales (-9.2%).

Industrial production remains weak. The 1.0% increase in the month of January (-0.7% previously) was milder than expected (Bloomberg consensus: 1.9%; Itaú: 1.6%). After adjusting for seasonal and calendar effects, industrial production growth was 0.5%. Oil refining was the driving force in the monthly performance, rising 5.8% and contributing 1.2 percentage points to the total gain. Meanwhile, production of machinery and equipment fell 21.5% reflecting a frail industrial sector. We expect a mild activity recovery to 2.5% this year from 1.8% for 2017. Real wage growth progress (as disinflation unfolds), an expansionary monetary policy, and a well behaved currency will likely support firmer private consumption. Meanwhile, favorable external demand (supporting oil prices) will aid industrial production. Risks to growth arise from the still weak labor market and uncertainty around the political cycle that could keep investment suppressed. ** Full Story here.


Day Ahead: INEI will announce January’s GDP proxy throughout the day. We estimate the GDP proxy expanded 2.5% year-over-year (consensus: 2.2%). Also, INEI will publish February’s unemployment rate. We and the consensus expect the unemployment rate to come in at 7.8%.


Day Ahead: The Central Bank announced a FX swap rollover auction of up to 14,000 contracts.

Fuente: ITAU BBA

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