Wholesale Inflation: How Slowing Prices are Driving the Economy in the Midst of a Pandemic

In March, the Domestic Wholesale Price Index (IPIM) showed a 5.4% decrease compared to February, marking its third month of slowdown. This was below the Consumer Price Index (CPI) of 11% reported by Indec last month, indicating that inflation is likely to remain below single digits in April as per the Government’s assertion.

The IPIM measures the average evolution of prices of products of national and imported origin in the domestic market, excluding the value of exports in the calculation of relative weights for each activity. The interannual variation was reported at 330.6%, with a general level increase due to a 6.2% rise in national products and a 1.7% decrease in imported products.

Wholesale inflation has shown three consecutive months of deceleration since reaching its peak at 54% in December, reaching 10.2% in February and 18% in January. The first quarter closed with a 37% increase, indicating that prices are gradually stabilizing after the jump following the devaluation last year.

The Basic Domestic Price Index (IPIB) recorded a similar trend, with a 4.9% increase compared to February, but this was partially offset by a 1.7% contraction in imported products. The IPIB measures price movements resulting from changes in tax policy and does not include tax effects mentioned in the IPIM, making it an alternative analysis indicator that distinguishes between producer decisions and tax policies affecting prices.

The Basic Producer Price Index (IPP) also recorded an increase last month, with a 5% rise observed for primary products and manufactured products and electrical energy. The PPI measures the average variation in prices received by local producers, excluding imported goods and including exports in the weighting of each activity, with the same tax treatment as the IPIB.

Overall, these indicators suggest that while inflation may remain low for now, it is important for policymakers to continue monitoring price movements closely and take action if necessary to maintain stability and prevent future spikes.