Argentine Data Doubted Again as CPI Trails Private EstimatesCharlie Devereux
Five months after Argentina unveiled a new index to address concerns from the International Monetary Fund it was underreporting inflation, private economists are once again questioning the accuracy of its consumer price data.
Consumer prices rose 1.3 percent in June from a month earlier, the smallest increase this year, the statistics agency said today in a statement. The government doesn’t publish an annual inflation rate because it lacks a comparative index for last year.
While the new index is closer to reality than before, it places too much weight on prices controlled by the government, said Eduardo Levy Yeyati, director of Buenos Aires-based research firm Elypsis. That’s allowing the government to underreport inflation each month by 0.5 to 0.7 percentage point, according to Elypsis, which estimated that prices rose 2.1 percent in June from May and 40 percent from a year earlier.
“Rather than a lie it’s a methodological bias, a statistical sleight of hand,” Levy Yeyati said in an interview in Buenos Aires July 10. “There is a lot of weight put on prices that don’t vary with the rest, which are the controlled prices.”
The government has imposed price caps on 320 basic goods this year from beer to shampoo as part of a program called “Watch Your Prices” in a bid to contain inflation. Argentina encourages consumers to denounce supermarkets, including units of Wal-Mart Stores Inc. and Carrefour SA that are violating the accords as part of enforcement.
Economy Ministry spokeswoman Jesica Rey didn’t immediately reply to requests for comment on the disparity with private estimates. Economy Minister Axel Kicillof has argued that private estimates don’t have the geographical scope of the new index and he’s used news conferences to highlight differences in results between surveys.
“The methodological improvement is due to a geographical coverage that now incorporates the entire country,” Kicillof said June 13. “It’s a sample that’s very representative of prices with a group of products that was recalibrated based on new information we have about spending habits.”
The fact that most private estimates only measure prices in Buenos Aires may explain some of the difference in the figures, though not all of it, said Mauro Roca, a senior Latin American economist at Goldman Sachs Group Inc.
“The differences are increasing with time,” Roca said in a phone interview from New York. “If you compare the national index with the City of Buenos Aires’s index, there’s a significant difference of roughly 1 percentage point in June.”
Both government and private estimates show inflation rates falling as demand cools due to a slowing economy, Roca said.
Argentina’s economy contracted for the first time in two years after the government devalued the peso in January and raised interest rates to stem a drop in foreign reserves. Gross domestic product fell 0.2 percent in the first quarter.
Price increases in June were led by housing and utilities, entertainment, and education, which rose 3.3 percent, 1.8 percent and 1.3 percent respectively, the statistics agency said in an e-mailed statement.
Argentina had reported inflation figures below private estimates from 2007 when then President Nestor Kirchner overhauled staff at the National Statistics Institute. In 2011, the government tried to impose fines on private consulting firms that published inflation estimates contradicting theirs.
In February 2013, Argentina became the first nation to be censured by the IMF for failing to report accurate economic data. President Cristina Fernandez de Kirchner, whose term ends next year, overhauled her economic cabinet in November, placing Kicillof in charge with creating a new nationwide inflation index to replace the Buenos Aires index previously used.
The IMF set Argentina deadlines of end of September 2014 and end of February 2015 to improve its economic data reporting, spokesman Raphael Anspach said in an e-mail.
“The Managing Director will next report to the Executive Board on the status of Argentina’s implementation of the specified actions by November 14, 2014,” he said. “At that time, the Executive Board will again review this issue in line with IMF procedures.”
Inflation in 2013, a year in which the peso tumbled 25 percent against the dollar, was 10.9 percent, according to the government. A group of opposition lawmakers, which compile private estimates, said full year inflation was 28.4 percent last year.
Today’s figure trailed the 1.4 percent median estimate in a Bloomberg survey of nine economists. Maximiliano Castillo, director of Buenos Aires-based research firm ACM, said he estimated that the government would say prices rose 0.9 percent this month in the survey. Real inflation is between 2 percent and 2.5 percent, he said.
“With each number that comes out, the INDEC loses more credibility,” Castillo said, in reference to the National Statistics Agency. “It’s premature to say they’re cooking the books, but each time the difference increases.”
Still, Argentina has probably done enough to escape further reprimand by the IMF, said Levy Yeyati.
“The last thing the IMF would want is to fight with a country that’s important in the region like Argentina and with a government that’s on its way out,” he said.