According to the National Institute of Statistics (INE), the inflation rate slowed in June and closed the semester at 3.62%, lower than the 3.76% reported in May, despite the interruption of the main land communication routes as a result of the rains of the last few weeks, while housewives and heads of households claim that there is a constant increase in the price of the Basic Food Basket (CBA).
According to the Consumer Price Index (CPI), which is the instrument used to measure inflation, the inflation for June was 0.96%, the highest recorded in the semester and higher than the 0.80 in May; meanwhile, the accumulated inflation was 3.51%, a slight acceleration compared to the previous month, when it was 3.49%.
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The food and beverage division was the one that put pressure on the indicator, as it registered a variation of 0.21%, but the transportation division was negative by -0.12%, which are the items with the greatest weight in the structure of the CPI, which this year has a new calculation methodology.
Ups and downs
In the display, there are 10 products that had the greatest positive impact (increases) and negative impact (decreases). Nine were food products and the tenth was gasoline, according to the CPI: fresh tomatoes rose 0.07%; potatoes, 0.06%; fresh chicken meat, 0.04%; avocados, 0.03%; and cabbage, 0.01%.
Meanwhile, products that saw a drop in price were gasoline (-0.13%); tortillas (-0.05%); onions (-0.03%); chicken eggs (-0.02%) and fresh lemons (-0.02%).
And although the average interannual inflation was 3.62%, in Region II -North- which is Alta and Baja Verapaz, the indicator was 4.77%, the highest; while Region III -Northeast- composed of El Progreso, Chiquimula, Izabal and Zacapa, was 2.48%, the lowest.
High prices
On a tour carried out yesterday by Free Press y Guatevision, Traders explained that due to the rains that are affecting several departments and production areas, there have been increases in the prices of many vegetables.
Sellers and buyers at the Sur II market in zone 1 and the La Palmita market in zone 5 attributed the rise in prices to the cost of fertilizers and shortages, comparing current prices with those of one and two weeks ago:
For example:
- Pound of tomatoes went from Q6 and Q4 to Q10
- Onion pound, from Q6 and Q4 rose to Q8
- A pound of potatoes, from Q10 and Q4, is around Q9
- Carrot bag, from Q1 and Q3 went to Q5
- Whisky unit, from Q5 to Q8
- Broccoli, from Q17 dropped to Q10 and Q12
- Cabbage, unchanged at Q20
- Pound of beans, from Q8 to Q9
- Pound of rice remains at Q5
- Perulero, from three units for Q10 dropped to two for Q5
- Cauliflower, unchanged at Q20
- Bunch of cilantro, dropped from Q10 to Q5
- Pound of corn unchanged at Q2.50
- Lettuce, the unit went from Q8 and Q3 to Q10
- Avocado, unit Q10
- Sweet chili, unit Q2
- Güicoy, two units for Q15
- Güicoy Seasoning, unit Q40
The head of the household, Luis Escobar, who went to the “La Placita Quemada” market, said that everything is expensive, due to the rain and fertilizer, and he regretted that everything is going up in price. “Here I have Q50 and it is not enough, to buy well I would need another Q50.” Everything went up, tomatoes, onions, potatoes, güisquil, carrots.
Housewife Rosa Esquivel said that it affects everyone because everything is expensive and salaries remain the same, explaining that she bought a pound of tomatoes for Q10.
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Meanwhile, María Robledo, a vendor at the La Palmita market, said that the price increase is “even” for vegetables, groceries and fruit. She justified this by saying that the government is buying food for school programs, the past drought and the current rain, which has ruined everything.
Rain of criticism
Miguel Gutiérrez, researcher at the Foundation for Economic Development (Fedes), and Guido Rodas, former manager of the INE, stated that the inflation data reported by the INE does not reflect the reality of consumer prices.
Gutiérrez questioned the methodology adopted by the INE this year, because “there was no reason to change it and the one currently used by the Economic Commission for Latin America (ECLAC) has serious conceptual problems.”
In any case, he recommends that the authorities reverse the use of this measurement method, “because everything worldwide is going up in price, but not in Guatemala, so there is no consistency in the methodology.” In his opinion, consumption is poorly weighted, and the way prices are measured is defective.
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Rodas said that the INE report does not include a consolidated table of major sectors, such as food, transportation, health, education, among others, but the crisis that has been observed in food and transportation began in the last ten days of June and worsened so far in July.
“Perhaps the dates of the weighting influenced the slowdown in the inflationary rhythm. However, the inter-monthly inflation in May was 0.3% and in June, 0.13%. In food in urban and rural areas, there are increases of 0.93% and 1.03% respectively. In any case, it is not a significant slowdown.” He anticipated that there will be a noticeable impact in July, especially in food and transport.
Clynton López Flores, director of the Faculty of Economic Sciences at Francisco Marroquín University, is emphatic that the inflation figures reported by the INE are not credible and the institution “should carry out a campaign to explain what they have done and why they have done it, in addition to renewing its board of directors to show goodwill and credibility.
Regarding the calculation methodology, he indicated that they should review it and report the changes and the reasons for them, for reasons of transparency. But in the meantime, “people perceive that inflation is higher than reported, which also affects the Banguat because it indicates a loss of credibility in its management.”
They defend methodology
Hugo Maul, an analyst at the National Economic Research Center (Cien), explained that the INE figures are based on a standardized and rigorous methodology that includes the collection of data on a wide variety of goods and services in different regions of the country. “These data show us that, in general terms, inflation has been moderate.”
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However, he noted that the perception of inflation can vary significantly among individuals due to several factors. In addition, the media can influence public perception by highlighting price increases on specific products that affect the majority of the population.
“I don’t think the methodology of the new CPI needs to be revised, since meetings of user committees, expert committees and public presentations of the methodology were held throughout last year.”
In any case, he said that it would also be fair, for the sake of scientific (and rhetorical) rigor, to ask regarding the bias in the measurement of the old CPI. “Because if you are going to doubt the new CPI, you can also doubt the old one.”
He recalled that when we talk regarding the monthly average, we are talking regarding an average of measurements made over 10-day periods – decades – and it is very likely that the June measurement did not capture the effects of the last fifteen days.
The climate will put pressure
Álvaro González Ricci, president of the Bank of Guatemala (Banguat) and the Monetary Board (JM), reacted to the inflation data for the first half of the year:
How do you analyze the June inflation report?
The June 2024 inflation rate of 0.16% is low compared to Junes in previous years (in June 2023, monthly inflation was 0.30%), resulting in a decrease in the inflation rate from 3.76% in May to 3.62% last June. This is in line with the central bank’s forecast for the end of 2024, of an inflation rate of 4%.
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What factors influenced the June CPI?
There are the components of the food division, in particular the average price of tomatoes, potatoes, chicken meat and avocados, among others. These increases were moderated, in part, by the decrease recorded in the average price of gasoline.
What are the expectations for inflation in the second half of 2024 and in 2025?
Taking into account the inflation result in June, the forecasts of the technical bodies of the Bank of Guatemala continue to anticipate that inflation at the end of 2024 would be at 4%, right at the central value of the inflation target determined by the JM (4.0% +/- 1 percentage point). This is also anticipated for 2025.
It is worth mentioning that these projections are not free of risks, on the external side, due to possible future increases in the international price of oil, which is transferred to the domestic price of fuels. On the domestic side, climatic factors might continue to put pressure on food prices, particularly agricultural prices.
“Reality and perception are different”
José Andrés Ardón, executive director of the Institute for Business Competitiveness (ICE), referred to the issue, indicating that although the year-on-year inflation in June 2024 was 3.62%, within the target range established by the JM, there is a discrepancy between official calculations and the perception of the population, which can be explained by several factors:
- Methodological change: The INE implemented a new methodology to calculate the CPI starting in January 2024, which affects comparability with previous figures and public perception.
- Variations by sector: Although overall inflation is moderate, certain sectors may have experienced more significant increases. For example, food and transport tend to have a more direct impact on public perception.
- Unreflected current factors: Recent events such as rains, landslides or port problems are probably not yet fully reflected in the June data, which might explain part of the discrepancy with public perception.
- Regional differences: The new methodology includes differentiated baskets for urban and rural areas, which might result in different inflation experiences depending on location.
Likewise, he states that the current methodology is based on international standards. It was recently implemented with advice from the International Monetary Fund (IMF) and the Economic Commission for Latin America (ECLAC) and it should be noted that:
- The update was necessary, as the previous one was more than a decade old and consumption patterns have changed.
- The new basket includes more products (437) and varieties (930) than the previous one, which should provide a more accurate measurement.
- Different basic baskets have been created for urban and rural areas, allowing for a more precise measurement of the realities of different segments of the population.
- The current methodology appears to be sound and based on international standards.
Based on the above, the ICE suggests that the INE should disseminate its methodological principles more widely among the population. In other words, the new methodology, which appears to be a robust update, should be constantly reviewed to verify whether it is adequate or requires adjustments. “The occurrence of recent conjunctural events might be the cause of the discrepancy between official data and people’s perception.”
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