Fynsa
After a major surprise in October, inflationary expectations had receded significantly. After a long time, prices were not rising as much as expected, some products were taking a breather and, perhaps more willingly than anything else, there was a way out of this problem that we had not seen for decades.. Although there was reason to be hopeful, our view and analysis called us to be cautious, not to forget the context in which we were living.We should not forget the context in which this was happening and, above all, we should not forget the persistence that the evolution of prices had been showing for months.
Thus, we released the CPI for November, which rose 1.0% m/m, above what the market (0.4% m/m) and we (0.6% m/m) expected. With this, the indicator accumulated an increase of 12.5% during the year and a variation of 13.3% in twelve months.The increase came after two consecutive declines.
To make a long story short, the data took care of showing us that inflation is far from no longer a problem, as part of the market thought after last month's downside surprise (a bandwagon we never jumped on).as part of the market thought after last month's bearish surprise (a bandwagon we never jumped on), regardless of the fact that, on this occasion, the influence came mainly from non-volatile goods and the volatile component. We highlight the latter given, in the communiqué of the monetary policy meeting, the Central Bank highlighted that the downward surprise in October had been influenced by a decline in underlying goods. Although we had a more inflationary bias than the market, something that really surprised us was the diffusion index, which reached 71%, marking a new all-time high.. Unlike the previous record, this comes in a month that usually has low diffusion indexes.
Double-clicking on the divisions, we remain concerned about what is happening with food. Even considering significant variations for the month, we fell short in meats, dairy and fruits. Thus, this division continues to be by far the one that has the greatest impact on annual inflation. If we add what we have been able to take in prices for December, the situation does not look very encouraging, which increases the risk of unorthodox solutions to "combat" them.
Thus, for December for December we estimate a monthly price increase of 0.5%, higher than our previous projection, to which we even included an upward bias considering certain risks that could materialize as the month progresses.We even included an upward bias considering certain risks that could materialize as the month progresses, especially linked to the truckers' strike and certain assumptions we have made for fuels. Thus, inflation would close 2022 at 12.9%. Towards 2023 we would see a decrease in pressures, but with multiple risks associated with both the volatile component and persistence and tariff adjustments. We maintain our projection for the end of next year at 4.7% YoY.
