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05/11/2012 | 05:11pm
–Government says April CPI rose 0.8% on the month, bringing the gain over past 12 months to 9.8%
–Private economists say that prices are actually rising at a much faster pace and accuse the government of low-balling inflation
–Economists and residents expect prices to continue to soar over the next year
(Adds banker’s comments on slowing economic growth in the last two paragraphs.)
By Shane Romig Of
Argentina reported an April inflation rate of 0.8% on the month, nearly two-thirds lower than the pace private economists say prices are actually rising.
April’s consumer price index was up 9.8% on the year, the national statistics agency Indec reported Friday.
On Thursday, opposition congressmen released their monthly survey of inflation forecasts provided by anonymous private-sector research firms, which stood in sharp contrast to the official figures.
Consumer prices rose 2.2% on the month in April, and were up 23.5% on the year, according to the average estimate of more than 10 contributors.
The opposition congressman began releasing the consolidated inflation report last year after the government prosecuted and slapped hefty fines on a number of local economists for producing what it labeled as misleading inflation reports.
Indec’s economic data have been suspect ever since a staff shake-up at the agency in early 2007 saw long-serving civil servants replaced by political appointees. The government stands by its figures, but most independent economists accuse the government of doctoring the books to smooth over rampant inflation.
Meanwhile, consumers are counting on another year of surging prices. According to a closely watched survey published in April by Torcuato Di Tella University, residents are expecting prices to rise 30% over the next 12 months.
According to Bank of America Merrill Lynch, Argentina’s inflation in 2012 is likely to clock in at 28%, topping the 23% price gain seen in 2011.
“We expect inflation to continue accelerating as fiscal spending grows strongly and the parallel exchange rate weakens,” Merrill Lynch analyst Marcos Buscaglia wrote in a report Friday.
In recent months, the government has put tight restrictions on dollar purchases by local residents worried about an economic slowdown and the value of the peso.
That has stoked a parallel market where individuals desperate for dollars, but unable to get approval to buy them at a bank or exchange house, have turned to the black market where they are paying more than 5 pesos for a U.S. dollar. That compares with Thursday’s close of ARS4.439 per dollar on the formal wholesale foreign-exchange market.
According to Deutsche Bank, loose monetary policy in tandem with tight import controls are stoking the steep price gains. “This is likely to continue as the government has seriously weakened all the institutional set-up to control inflation. It will take a very weak economy for inflation to start moderating,” Deutsche Bank said in a report Friday.
There are signs that just such a slowdown may be in the cards.
The economy expanded by 8.9% last year, capping a decade of blockbuster growth since the country’s economic meltdown and default in 2002. However, the central bank is forecasting gross domestic product growth of 6% this year. Many economists say that is very optimistic.
Banking group Grupo Financiero Galicia SA (GGAL, GGAL.BA) is forecasting GDP growth of 2.5% to 3% this year, down from 6.5% to 7% in 2011. Galicia’s figures are lower than the government’s as they are based on private estimates of inflation.
“There are clear signs of a deceleration,” Galicia’s head of investor relations, Pablo Firvida, said in a conference call with analysts Friday.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com
–Alberto Messer and Taos Turner contributed to this article.
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