Inflation ticks up to 2.9% one week after statistics agency controversy

Argentinas inflation rate for January ticked up to 2.9%, according to a report by the governments statistics agency, INDEC, released one week after the bureaus head resigned over a dispute over the measurement methodology. Prices increased 32.4% interannually, and the economic sector with the largest monthly jump was food and non-alcoholic beverages, with a 4.7% spike. January marked the fifth consecutive month of accelerating monthly inflation. The INDEC had originally planned to change the methodology to calculate inflation, and Tuesday would have seen the debut of the updated index. The current one uses a basket of goods and services stemming from a nationwide survey made in 2004, and the bureau aimed to replace it with a 2017-2018 study. However, Economy Minister Luis Caputo said he and President Javier Milei did not agree with the modification, saying the new index would only be implemented once the disinflation process is fully consolidated. The head of the INDEC, Marco Lavagna, resigned over the disagreement. The major difference is that the new method would have assigned more weight to the cost of utility fees and transportation, two sectors that saw spikes during the Milei administration. Our view is that the index should not be changed now. In fact, it makes little difference, Caputo said in an interview with Radio Rivadavia. In a report published last week, consulting firm PxQ calculated that, using the 2017-2018 weighting factors, inflation for January would have been 3%. Another consultancy, Epyca, said that inflation nowadays is measured using a basket of goods and services from a time when there was no mass internet connection or smartphones, but it did include measuring the price of fax machines, floppy disks, compact discs, and movie rentals at video stores. A report by Banco Provincia said that the reversal of the methodology update not only affects the figure, but it also allows the government to curb public spending on items that are automatically updated through inflation. According to the document, the administration will save 5 trillion pesos this year due to lower spending in social security, such as pensions, and in inflation-adjusted government bonds. The analysis concluded that the amount represents just under 0.5% of the countrys GDP.