Argentina’s consumer price index, which includes obsolete items, calls for reform, as many economists believe the actual inflation rate is higher than reported. With significant upcoming elections, President Milei’s government may hesitate to revise the index despite public skepticism regarding official statistics and persistent high costs owned by citizens. Ineffective current methodologies highlight the urgent need for updating inflation measurements.
Every morning in Argentina, individuals engage in their daily routines, such as reading newspapers and using landline phones. This portrayal, however, is largely outdated, yet it forms part of the consumer price index utilized by the Argentine government. This situation has prompted calls for President Javier Milei’s administration to reform the index, as many obsolete items must be replaced with modern necessities like smartphones and digital subscriptions.
Economists posit that an updated index would likely reflect a higher inflation rate than the current monthly figure of approximately 2.5 percent. Independent studies suggest that regional inflation rates often exceed the national average, and even the director of Argentina’s national statistics institute, INDEC, acknowledged the need for modification. However, lack of action on this front persists six months later.
Milei’s government faces potential risks with such changes, especially with upcoming midterm elections. Although the annual inflation rate has significantly improved, from 276.2 percent the previous year to 66.9 percent recently, any modifications to the inflation metrics could undermine the administration’s perceived success and approval ratings. Additionally, a revised index could lead to increased expenditures on inflation-adjusted bonds, which are crucial for government funding.
Long-standing issues with inflation have engendered skepticism among the Argentine populace towards official statistics, especially after a previous scandal involving INDEC’s manipulation of data. Many citizens assert that while inflation has decreased, prices for essential goods continue to rise. Ángel Santos, a Buenos Aires building superintendent, articulates that costs for daily necessities remain a burden, highlighting a disconnect between reported and perceived inflation.
A recent poll revealed that inflation remains a primary concern for many Argentines, with approximately 42 percent identifying it as the country’s most significant problem. Labor unions estimate that actual inflation exceeds official figures by 10 to 22 percentage points. In response, INDEC’s Director Marco Lavagna announced plans to update the inflation basket, expressing caution regarding the timing and extent of changes to be made to the index.
Concerns have also been raised regarding the underrepresentation of services in the inflation calculation. While essentials like food retain a substantial weighting, vital services such as healthcare and digital subscriptions are inadequately represented, not matching current consumer spending patterns. Economists emphasize that service consumption has surmounted food consumption since 2004, necessitating a revision.
Though rental prices and various essential service costs have surged significantly, they are still weighted less than food prices in the index. Current INDEC data reveals a sharp contrast: while tobacco and newspaper prices align with the reported inflation, rents have increased by 240 percent, and internet costs by nearly 100 percent within a year.
To enhance the accuracy of inflation measurement, Lavagna proposed a new survey methodology aiming to align with international standards, including an increase in sample size. Nevertheless, analysts indicate that failure to implement an updated basket will likely continue to perpetuate a disconnect between reported and real inflation in Argentina.
In summary, Argentina grapples with the pressing need to update its consumer price index to better reflect current economic realities. President Javier Milei’s administration faces significant challenges in addressing outdated elements of the inflation calculation, as the populace remains skeptical of official statistics amidst persistent high prices. The proposed revisions, while critical, have yet to materialize, emphasizing the necessity for a more accurate representation of inflation to ensure informed economic policymaking and public trust.
Original Source: www.batimes.com.ar
