This week, INE published the CPI for October, which showed a surprising increase of 1.3% over September, which was well above expectations. Again. With this, the year-on-year variation reached 6.0%, which had not been observed since 2008. In this space we have made several analyses regarding the inflationary phenomenon we are seeing, its causes and, of course, its consequences. Notwithstanding the above, my idea is to show that the October increase does not follow the line of September (nor the previous months, by the way), beyond the fact that it is not a reason to lower our guard and/or to ignore the fact that the UF is going to increase $433 in one month.

First, one of the most important underlying indices (if not the most important), the CPI without volatility, showed a 0.3% increase over September. This same indicator showed a variation of 0.7% in the previous month, which means that the more "fundamental" inflation was considerably lower than the total index. An ingredient that goes in the same line is related to the items that increased the most in price. Here is something very relevant, since it is something that, at least I, had never seen before in a price report: 0.8 pp of the increase (more than 60%) was explained by only two products. Yes, you read that right, two products. These were airfare, with a variation of 45.4% m/m, the largest historical increase of the product since 2009 (current sampling methodology) and package tours, with a 55.8% increase, also the largest increase in history. These increases are deeply striking, because they should only respond to price changes from one month to another and not to variables such as changes in price collection or imputation reimbursement. My colleague Jorge Selaive, made an interesting comparison of the evolution of this last product with other countries and concludes that, in Chile, we not only have an increase that is well above the average, but also with an extremely high volatility. Probably a point to be reviewed by INE.

Another relevant point has to do with the diffusion index, which is measured by us as the percentage of goods that increased in price. This reached 51% in October, down from 61% in September and 58% in the same period of 2020. Moreover, it was below the average of the last few Octobers, which reached 57%. In addition, all items that have shown a high demand since the beginning of the recalls showed year-on-year declines, something really unprecedented in recent times.

I insist, this should not make us lower our guard and the concern about what is happening with prices should continue, since it is those with fewer resources who end up being most affected. However, it is good to check a little further from time to time, so as not to draw the wrong conclusions or to believe that all inflation is the same. If not, ask those who find that what happens in Chile is only caused by international inflation and for this they only compare the variations. Absurd, isn't it?

Nathan Pincheira

Chief Economist of Fynsa