Alphacast High Frequency CPI: Inflation was 10.2% MoM in August

Monthly inflation spiked at 10.2% MoM in August. Inflation remains at its highest value in decades, coupled with the highest annual inflation since the end of hyperinflation. Annual inflation was 121.2% YoY (compared to our measured values for August 2022), continuing the trend of extremely elevated printings.

Core inflation, seasonal items and regulated prices went up. During the eighth month of the year, core inflation was 10.6% MoM, above the previous 6.5% MoM. Moreover, seasonal prices increased 9.6% MoM (vs previous 5.1% MoM). Lastly, regulated prices grew 8.9% MoM (vs 6.7% MoM). The incidence of core inflation was 6.7pp. in August, with a further 1.3pp due to regulated price increases, and 2.1pp to seasonal items. In consequence, without regulated price adjustments, inflation would have been in the 8.8% MoM territory.

Our CPI’s statistical carry-over from August to September was 6.8% (vs 3.0% in the previous month). In addition, end of period (4-weeks) inflation was 12.5% MoM by the end of August.

Inflation dynamics for 2023 will remain elevated, with increased uncertainty. Given that the first 8 months of the year showed very high price dynamics and no credible policy action has been taken, inflation will likely persist at an elevated pace during 2023. Surveys of professionals and consumers show that inflation expectations remain at drastic levels: expected inflation for 2023 is 142.2% YoY, while inflation for 2024 is expected to be 106.7%, according to the Central Bank's REM. Nevertheless, expectations were issued before the jump in the exchange rate, so they are expected to rise in the next report that incorporates the new inflationary dynamics.

After the political surprise of 8/13, the Central Bank raised the official exchange rate by 21.8% and locked it at a value of $ 350, so inflation is again on shock mode. End of period (4-weeks) dollarized inflation was 18.0% MoM by the end of August, and headline inflation marked the first instance of a double-digit figure for a single month since the ending of the Convertibility plan. In addition, the government adopted expansionary policies to cushion the impact of the pass-through and protect the population's purchasing power. All these measures will cost 0.5% of GDP and will put further pressure on inflationary dynamics. Thus, the inflation rate will continue to behave unpredictably and will remain at its current historical highs.