Argentina’s New Inflation Statistic Offered Glimpse of Reality
An asterisk next to the word Argentina was a common sight in any magazine or publication. Of course, the asterisk pointed out that the data provided by the National Statistics and Census Institute (INDEC) was dubious. Not even Venezuela had the “right to an asterisk.”
The Kirchner administration, desperate for credit, decided to unveil new inflation and economic-activity statistics. Of course, this came after grumbling against the IMF authorities, faithful to the president’s reputation.
This evolution of the Gross Domestic Product (GDP) data brought a swift revision downwards, and inflation, at least at the outset, reached shocking levels.
The first data of the new National and Urban Consumer Price Index (IPCNu) came out in January, and it surprised everyone with how close it was to the Congressional IPC measure. That is an index released by opposition members in Congress, an average of inflation measures prepared by private institutions.
The similarity was not without a touch of irony, given that just months earlier, ruling-party officials had declared the Congressional IPC an eyesore.
Nevertheless, the truth didn’t last long. The following graph shows the evolution of the IPCNu and the Congressional IPC.
Monthly Percentage Change: Consumer Price Index
During the first three months, the new INDEC measure of inflation tended to follow the Congressional IPC. However, since April, the disparity and lies are back.
The acknowledgement of out-of-hand inflation came as a surprise — 53.8 percent on an annual basis — but to see the reporting last for three months was an even greater surprise. Before the IPCNu data came along, the Kirchner administration said that inflation was barely one third of the private estimates.
The IPCNu raised proportion of inflation it was willing to admit from 33 percent to almost 80 percent. However, the disparity started to widen again in April, as the official rate fell considerably (see the following chart.)
As has occurred with economic-growth numbers, the official measure is tending towards 50 percent of reality — although in an inverse manner.
On August 15, the INDEC released July inflation data, for the lowest degree of recognition in the past four months. If this trend continues, soon enough we will start hearing complaints about the IPCNu from international organizations. Simply put, a half-true measurement won’t achieve the sought-after recognition.
Moreover, as government spending has not decreased and policies on the table are aimed at “deepening the model,” sooner or later the Kirchner administration will likely resort to the money-printing machine. Other sources of revenue are already squeezed, so inflation is set to become even more severe.
Finally, one must mention that this kind of juvenile ploy with the numbers just delays what is unavoidable. Every day, people are interacting with prices. They can tell if their purchasing power has increased or not, beyond what mercenary statisticians may tell them.
International organizations are also aware of the lies. It is a shame that what appeared to be a sincere correction was fleeting. This latest reversal continues to damage the institutions and confidence in the nation.