CHILE: MAY CPI OF 0.2% M/M (4.4% Y/Y), IN LINE WITH OUR EXPECTATIONS
- Preliminarily, we project negative CPI for June
This morning, INE released May CPI data showing a 0.2% m/m (4.4% y/y) rise in prices, in line with our projection and the market expectations. Core CPI (ex-volatiles) rose 0.4% m/m, marginally above our point projection, but accumulating a negative surprise of 0.2% since last March compared to the last Monetary Policy Report (MPR) baseline scenario. The main reason for this surprise in the May CPI (ex-volatiles) comes from Cyber Day, where we observed high diffusion in goods and services, an aspect already characteristic of the month prior to Cyber Day, but which manifested itself much more intensely this time. In this context, the reversal we could observe in the June CPI could also be larger than that observed in previous years. We raise the risk that the June CPI will not only be negative, but markedly negative, with zero impact on gasoline, but with a significant drop in international air transport and the usual reversal of goods prices during Cyber Day.
By division, the main positive contributions came from food and household equipment. As anticipated, dairy products and eggs contributed positively to this inflation record, which was partially offset by the drop in the prices of fresh fruits and vegetables. Similarly, the rise in the prices of goods and services for household maintenance explained a large part of the positive impact in the household equipment division, which includes products such as detergents, disinfectants, dishwashing liquid, and others.
Inflationary diffusion increased prior to Cyber Day, but with higher-than-usual impacts. Our projection assumed an increase in total inflationary diffusion explained by goods, which materialized similarly to that observed last year. However, while the number of goods ex-volatiles that increased in price was as expected, the magnitude of their price gains was higher than anticiapted (raising the significant risk of a reversal in the June CPI). On the other hand, services diffusion was markedly above its historical average (61%), although the magnitude of the observed increases and their impact on the total CPI were in line with our projection (chart 1 and 2). This also points to reversals in the June CPI.
We preliminarily project June CPI between -0.1% and -0.3% m/m, with declines in international air transport services, some volatile and ex-volatiles goods, low or zero impact on services, and no impact on gasoline.
—Aníbal Alarcón
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.