Argentine inflation hike no surprise to consumers

BUENOS AIRES (AFP): Argentine waitress Daiana Alonso didn’t need inter’l economists to tell her that prices were rising fast, she has already been forced to give up buying meat. Like many Argentines, the 23-year-old low income worker is concerned about the widespread inflation. On Thursday, under pressure from the IMF, Argentina introduced a new way to measure inflation, which confirmed what most consumers already knew. And Argentina’s sharp devaluation of its currency in January will only fuel the nation’s already sky-high inflation. “You feel it at the supermarket. I stopped buying chicken and beef when prices climbed a lot.

A box of powdered milk for my child climbed from 45 to 55 pesos ($5.8 to $7.0),” Alonso said.

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Beef, an Argentine staple renowned for its quality, is now a luxury in many homes after prices for the most popular cuts jumped up to 23 per cent since the beginning of the year alone.

“Everything is going up, but not our salaries,” added the waitress, as she walked with her four-year-old daughter Martina in downtown Buenos Aires.

Over the past two years, independent private sector economists have estimated Argentina’s annual inflation at more than 25 per cent, compared to the government’s figure of around 10 per cent.

In 2012, the International Monetary Fund warned Argentina over its failure to provide regular data on inflation and economic growth through measures that meet the Fund’s standards.

Economy Minister Axel Kicillof unveiled a new measure this week, and confirmed that inflation was a sky-high 3.7 per cent for the month of January alone.

But this would have come as no surprise to Laura Martinez, 44, who is confronted by inflation every time she fills a monthly prescription for her nine-year-old daughter.

“What? 600 pesos? Last month, I paid 530 pesos. I’ll buy it anyways; at any rate, I don’t have a choice,” she exclaimed in the pharmacy.

The prescription’s price rose in the last month from 1,770 pesos to 2,000 pesos, but her insurance pays for 70 per cent of the cost.

Martinez also lamented having paid 165 pesos for a visit to the dentist, which formerly cost only 110 pesos.

- Fighting cheese theft -

In some supermarkets, basic consumer goods whose prices have surged — like tuna or grated cheese — are protected by anti-theft devices.

Imported products in particular have been hit hard by last month’s de facto devaluation, when the government allowed the official dollar exchange rate to move closer to the blackmarket one.

Romina Ferre, for example, has stopped buying the Scotch whiskey her husband loves.

For several weeks, President Cristina Kirchner has pointed a blaming finger at distributors and stores for price hikes.

The center-left leader accuses financial markets of destabilizing the government and businesspeople of price gouging.

“They wanted the government to crumble but in reality they were destroying Argentina, and when that happens jobs, savings, and businesses crumble,” she said last week.

Economists have advised Kirchner to reduce the budget deficit, currently at five per cent of GDP, and to limit wage increases and social welfare.

But Gerardo Felippini, 52, who started building his house in the middle of the crisis, doesn’t understand how a bag of cement made domestically can cost 55 pesos one day and 85 the next.

An employee at a large pharmacy chain estimated that the price of drugs has climbed 30 per cent.

“A nebulizer for asthma, which cost 500 pesos last week is 800 pesos today. A mosquito repellent worth 40 pesos sells today for 75,” she said.

“But what can you do? People can’t stop buying medicine. It’s a matter of life or death.”

Pakistan, Turkey, Kabul chambers call for strong logistic connections

ISTANBUL (INP): The heads of the national chambers of Pakistan, Turkey and Afghanistan met in Istanbul to discuss further enhancement of economic cooperation among the three countries and integration of their economies. A joint declaration issued at the end of the forum said trade and economic relations in the region can be enhanced through strong logistic connections between the three countries, and these should in turn be extended to Central Asian countries and to the rest of South Asia. In December, Pakistan Railways and the Turkish Logistic Company signed an MoU on the establishment of an Istanbul-Islamabad containers train service.

The delegates at the forum said the planned service could be branched out by overland links to Afghanistan via Chaman and Torkham.

The Pakistan-Afghanistan Transit Trade Agreement should be amended to accommodate the proposed links, they suggested.

They called for arrangements for fast-track business visas between the three countries.

Turkey hosted the eighth Turkey-Afghanistan-Pakistan Trilateral Summit around the theme of “Sustainable Peace in the Heart of Asia,” with the aim to strengthen multidimensional cooperation among the three countries in the fields as politics, security and economic development.

ECB ready to take ‘decisive action’ if needed

FRANKFURT (Reuters): The European Central Bank is ready to take "decisive action if required" should inflation risk becoming entrenched below the ECB's target of just under 2pc, Executive Board member Benoit Coeure told. The ECB left interest rates unchanged at record lows earlier this month despite inflation slowing to 0.7pc in Jan - far below the bank's target of just below 2pc. The ECB opted to wait until its March meeting to assess more information before deciding whether to take fresh policy action. "The Governing Council's assumption is that the rate of inflation will gradually increase towards our target of close to, but below, 2 percent," Coeure told Slovenian newspaper Delo.

"We are however closer to the area where inflation expectations could be altered and create downside risks to price stability."

"So we are very vigilant regarding risks to our baseline scenario, which envisages inflation slowly going back to 2 percent over the medium term," he added. "We remain firmly determined to maintain the high degree of monetary accommodation that is appropriate for the euro area economy, and will not hesitate to take further decisive action if required."

"Over the next weeks and months, if risks to our main scenario materialise, we will be ready to act, consistent with our forward guidance."

China January lending soars

to four-year high

BEIJING (Reuters): China's banks disbursed the most loans in any month in four years in Jan, a surge that suggests economy may not be cooling as much as some fear. Chinese banks lent $217.6b worth of new yuan loans in Jan, beating a 1.1 trillion yuan forecast and nearly three times December's level, the People's Bank of China said in a statement on Saturday on its website. It is usual for loans to spike in Jan when banks try to lend as much as they can to grab market share, but last month's surge was still the largest since Jan 2010. Saturday's figures may assuage those who worry about China's hazy economic outlook following recent data that showed conflicting trends.

Distortions to the data as a result of January's Lunar New Year holiday is part of the problem, and some analysts believe it won't be till April before they get finally get some clarity on what is happening.

Some economists cautioned against reading too much into the latest figures.

"The bigger picture is that bank loan growth has been effectively flat since the middle of 2013," Capital Economics said in a note, adding that broader credit growth is at its lowest in nearly one and a half years. "We think that tight monetary conditions are probably here to stay."

Total social financing, a broad measure of liquidity and credit in the economy, was 2.58 trillion yuan in January, double the previous month's figure due to the surge in bank loans.

Compared to a year ago, Capital Economics said growth in total social financing had eased to 17.4 percent in January, the lowest in about a year-and-a-half and down from December's 17.8 percent.

The broad M2 money supply was up 13.2 percent last month from a year earlier, in line with a Reuters poll forecast of a 13.2 percent rise.

Outstanding yuan loans were up 14.3 percent from a year earlier versus forecasts for growth of 13.9 percent.

Bank lending is a centerpiece in China's monetary policy as banks lend at the government's behest, and are told how much to lend and when to lend.

January's lending surge aside, China's central bank has consistently signaled in recent months that it wants to temper credit growth to slow a rapid rise in debt levels across the economy.

It has focused in particular on keeping short-term interest rates elevated to force banks to stop lending to speculators or high-risk borrowers.

Analysts polled by Reuters in January said they expect China's economy to grow 7.4 percent this year, an enviable performance for a major economy, but still the worst for China in 14 years. The economy grew 7.7 percent last year.

Moody's maintains Italy rating but improves outlook

WASHINGTON (AFP): Moody's kept Italy's debt rating unchanged at a low Baa2 investment grade Friday but improved its outlook from negative to stable as the country moved to choose a new premier. The "resilience" of govt finances, despite Italy's high debt and the tough challenges. The update was scheduled weeks before and not directly related to the political tumult, with embattled Enrico Letta resigning as PM, paving the way for fellow Democratic party member Matteo Renzi. Moody's said that even though Italy carries the eurozone's 2nd highest debt load, it expects that burden to peak at below 135pc of GDP this year and hold steady as the economy begins to grow again.

In addition, Moody's said, the government can still manage its debt service at a tolerable 11.3 per cent of government revenue because of the relatively low cost of its debt. The ratings agency also cited a reduction of the risks from potential government liabilities like banks needing recapitalization.

And it said that the government's large, contingent commitments of support to the European financial rescue funds, the EFSF and ESM, were now less imminent a burden than when the eurozone countries were struggling more. Moody's stressed the political changes this week in the country did not affect its rating.

"Today's resignation of Prime Minister Enrico Letta and the expectation that Matteo Renzi will head a newly formed government does not alter Moody's expectations in this respect," it said.

Renzi, 39 and with little experience in high office, was almost certain to get the nomination to succeed Letta, but would then be tasked with building a coalition of his own.