Merida, July 11th 2013 (Venezuelanalysis.com) – Venezuela’s monthly inflation rate has receded for the first time since February, and scarcity of consumer goods is down, according to the June report of the country’s central bank. However, the annualised rate of inflation remains high.
According to the Central Bank of Venezuela’s (BCV) National Index of Consumer Prices (INPC), last month inflation decreased to 4.7%, from 6.1% in May. The inflation rate in May was not only the highest monthly rate since the INPC began in 2008, but also appears to represent the peak of a three month rise. Starting at 1.6% in February, the monthly rate rose to 2.8% in March, then 4.3% in April, before peaking in May.
So far this year, accumulated inflation sits at 25%, according to the BCV; more than three times the 7.5% figure reported by the bank this time last year.
Despite the decrease, the June rate is still the third highest on record (April 2010 registered at 5.2%), and the annualised rate of inflation remains the highest recorded by the INPC, at 39.6%. In 2008, the annualised rate was 30.9%.
The cost of food (including non-alcoholic beverages) and transport saw the highest price rises, at 5.8% and 6.4% respectively. The lowest price rises were reported in the education and communication sectors, at 0.5% and 0.7%. In most major cities including Caracas, consumer prices rose slower than they did last month. The only exception, Barquisimeto, showed the lowest regional increase in the first half of 2013, according to the report.
In the same month that inflation peaked, a 20% increase in the minimum wage came into effect. President Nicolas Maduro has announced that another increase of 10% will take place in September, and a third rise in wages will take place two months later. Maduro is yet to pin an exact figure on the third minimum wage increase, but has indicated that it will be between 5-10%, depending on inflation.
The price increases came following a devaluation of the Bolivar earlier this year. Despite increases in domestic production of staples in recent years, Venezuela remains a net importer of food. However, there is currently a backlog of requests for foreign currency. Next week, the BCV will hold its second auction of US dollars, under the new Complimentary System of Foreign Currency Acquirement (Sicad). Sicad allows importers to bid for US dollars specifically required for purchases, and is intended by the Maduro government to address business concerns related to access to foreign currency. Since being announced in March, only one auction has been held. However, starting this week the government intends to hold regular auctions.
Other ways that the government is trying to counter price rises is through a crackdown on speculators, while engaging with the private sector. In March, the Maduro administration indicated it would expand efforts to counter black market currency traders. The following month, the BCV’s president Nelson Merentes began to hold a series of meetings with business leaders to discuss ways to increase domestic productivity. Then in June, the head of Venezuela’s consumer protection agency Indepabis announced a crackdown on businesses that evade price controls.
While consumers continue to face increasing food prices, the report notes “improved food supplies” across the country. The scarcity index was at 19.3% in June, a decrease from May. The scarcity index measures the availability of consumer goods nationwide. In April, the BCV reported the highest levels of scarcity since the index started in 2009. However, after the April peak of 21.3%, scarcity decreased to 20.5% in May.