Argentina’s Inflation Index in Need of Urgent Overhaul Due to Obsolete Components
Argentina’s consumer price index remains outdated, with obsolete items distorting inflation figures. Calls for President Milei’s administration to update the index are growing, as higher inflation rates may be revealed through revisions. Citizens express skepticism about official data amidst rising living costs, emphasizing the need for reform ahead of upcoming midterm elections.
In Argentina, traditional items such as cigarettes and landline phones persist as significant components of the consumer price index. This outdated index has sparked calls for President Javier Milei’s administration to update it for the first time in twenty years by eliminating obsolete items and incorporating contemporary necessities like the iPhone and Netflix subscriptions.
Economists assert that a revised index would likely reveal inflation rates exceeding the current monthly figure of around 2.5 percent. Various studies suggest that local indexes often report higher inflation rates than the national average. Even the head of Argentina’s statistics institute, INDEC, acknowledged the necessity for an update approximately six months ago, yet no changes have been implemented to date.
For Milei, any alteration could jeopardize his inflation control achievements, particularly ahead of midterm elections slated for October. Currently, annual inflation has decreased to 66.9 percent from the previous year’s staggering 276.2 percent, presenting an illusion of success that Milei is hesitant to disrupt. Furthermore, a new index might result in increased payouts on inflation-linked bonds, which are vital for government financing.
Argentines, familiar with problematic official data due to past scandals involving INDEC, remain skeptical about the reported inflation decline. Many citizens, including individuals like Ángel Santos, are grappling with escalating costs of daily necessities. “Inflation is going down, but prices keep rising,” he states, highlighting the crisis enveloping various sectors, including transportation and healthcare.
Recent polls, such as an Atlas Intel survey, illustrate that inflation remains the top concern for approximately 42 percent of respondents. Labour unions contend that the true inflation rate may be 10 to 22 percentage points higher than official reports. In September, INDEC’s Director Marco Lavagna indicated plans for an update to the consumer basket, emphasizing careful timing despite acknowledgment that any changes would be modest.
An additional concern pertains to the inadequate representation of essential services in the index. Unlike food and utilities, categories such as private healthcare and digital subscriptions are underweighted, failing to reflect actual spending trends. Economist Mariana González notes a shift towards increased service consumption since 2004, indicating that rent, utilities, and mobile services have increased at a faster rate than food costs during Milei’s administration.
Lavagna’s proposal to revise the methodology for measuring inflation aimed to align with international practices recommended by the IMF and the World Bank, suggesting surveys every five years. Nonetheless, the plan did not progress, raising alarms that Argentina’s official inflation data may continue to diverge significantly from reality without a revised basket.
In summary, Argentina’s consumer price index is in urgent need of reassessment to eliminate obsolete components and reflect current economic realities. The reluctance of President Milei’s government to update this index could result in higher reported inflation rates, amplifying public concern over rising living costs. Ongoing issues surrounding data credibility and spending representation still challenge the accuracy of official inflation statistics, reinforcing the necessity for urgent reform in Argentina’s economic reporting.
Original Source: www.batimes.com.ar
