Photo via El Cronista

Argentines are no stranger to inflation. Indeed, when the National Bank announced it was introducing a new 1,000 peso note in October, the creeping cost of living was, for many, the first thing that sprang to mind. So when cabinet ministers met at the Casa Rosada yesterday, and were informed by Treasury Minister Nicolás Dujovne that the estimated rate of inflation for May (1.7 percent) was one point less than in March, a sigh of relief was to be expected.

But the joy was not complete, because that same day, the Indec National Statistics Agency issued a report informing that the poorest in our society experience a higher rate of inflation than the rest. It wouldn’t be a surprise that poorer people feel the hit of inflation more sharply than others — after all, they have less disposable income to work with. But Indec’s claim means that the poorest are suffering more even as inflation drops. Briefly, this is because the cost of essential goods and services used by the most vulnerable sectors of society, is increasing at a greater rate than general inflation. To understand this fully, we need to look at how Indec calculates poverty, destitution and quality of life.

Results via Indec
Results via Indec

In a report entitled Living Conditions, published by Indec yesterday, it outlines two tools used to measure the factors: the Total Basic Basket (CBT) and the Basic Food Basket.

The former sets out the goods and services that an average family (a breadwinning 35 year old man, his 31 year old wife, their 8 year-old daughter and 6 year old son) need, per month, in order not to fall below the poverty line, and what this will cost. According to Indecs most recent figures, the amount needed to stay above the poverty line is AR$ 14,501 a month, with AR$ 5,918.80 needed to keep families from destitution levels.

If we compare these current figures to those back in January, we find that the cost of living for those on the poverty line has increased by 10.22 percent (and 8.4 percent for those on the threshold of destitution) over that first quarter of the year. The general rate of inflation (or Consumer Price Index) over the same time period came in at 9.1 percent.

Results via Indec
Results via Indec

This shows that products used by the poorest in society are getting more expensive at a faster rate than other consumed by middle and upper classes. The general level of inflation is based on a wider variety of products, but when we look at the index for lower sectors of society with fewer products, the increase is greater; thus essentials are increasing more than the more luxury goods.

The reason for this that the CBT, a factor used to measure poverty, includes basic public services like light, gas, water and transport, as well as the basic foods included in the CBA. The value of these services is what is increasing most significantly, and as the services make up a large part of the CBT, but not the CBA or general IPC inflation rate, the value of the Basic Basket is increasing at a greater rate than the other two. Indeed, Indec revealed that since December, the cost of basic goods increased by 7.7 percent, while services experienced an increase of 11 percent.

Looking to the future, the next report on poverty will be released in September, detailing statistics from the second half of the year. In the meantime, let us hope that the government does its best to ensure that the most vulnerable in society have access to basic services they need.