(Cameo, Word Up!, 1986)
In the blue corner we have the finance minister telling us inflation is under control, the stats office telling us that January growth came in at over 10%, the gov’t Markets fat controller saying it was all the retailers’ fault and the incredibly unlikeable cabinet chief telling us that Peru’s inflation was 4%.
Far too many hyperlinks there, but it does give an idea of the amount of debate going on right now in Peru about inflation, growth and all that malarkey. So it’s time to sift through the crap, stop taking sides and get real. Some basic points and my take on each one coming up:
1) CPI climbed 1% in February, yep. The gov’t claims it was due to the landslides and the protests that cut supply lines to Lima. Otto Sez: I’ll believe them this time, but any more of those 0.5% monthly inflation numbers and Carranza’s inflation targeting will belong in Franz Kafka’s world, not mine. On the downside, this gov’t is getting real paranoid about inflation and unions are calling for national strikes to protest the price rises.
2) PPI is running at 7.59% per annum, and that’s a sharp increase. Food&bev inflation is at 7.8% per annum, which beats the overall number easily. There is some evidence of retailers hiking prices on a few food products (the gov’t highlighted garlic, of all things). Otto Sez: yeah right, Alan and co. will blame Hugo Chávez for the price of Broccoli next. These people trying to tell me that construction materials go up 9.46% in a month and the guy contracting the builder won’t have to pay extra? Gimme a break, guys…things are more expensive. Admit it.
3) Growth looks solid and strong. The motor is construction, with many an anecdotal tale going around about how land prices are shooting up, labour shortages in the building world etc. Otto sez: Ok, let’s take that 10.06% January growth figure as gospel, and it does tie in with other numbers coming out right now such as non-skilled and black market labour wage increases, cement dispatches etc.
All well and good, but how does it all add up? Here we go with le chart du jour, which compares Peru’s GDP growth, its salary growth and its official inflation rate. Now this chart does need a little explaining to get it into context so bear with me.
Firstly, all the stats used are official gov’t numbers from either the INEI or the economy ministry (pretty promise). So to explain, I’ve taken 2003 as the base point for the three sets of numbers, and indexed the year at 1000. Then in the four years that follow the percentage differences are compounded to the starting point. For 2007, I’ve used the very latest figures that drag into 2008 a bit, with February being the cut off for all three numbers. Unfortunately, the national salary figures are way out of date so I’ve gone for the Lima+metro number.
So what’s the upshot here? Well GDP growth of 25% in four years, that’s what’s happening. That rocks, but there’s no doubt that metals prices have been leading the charge and a lot of the money made isn’t seen by José Publico. That’s clear just by looking at the gap between GDP and salary growth. But the latest set of numbers look encouraging for a gov’t pinning all hopes on a trickledown model; for the first time in all that time salaries are outstripping inflation, even though inflation rates have been catching the headlines. That’s good, as long as the stats are reliable. I’ve got to say I have my doubts and the methodology used to take the salaries survey is a bit shaky, but there’s no way I’m dismissing the salary numbers as false. It’s called “benefit of the doubt”.