Inflation could surge to over 50% ... price behavior is affected by regulations

<a href=www.vheadline.com>venezuela's Electronic news Posted: Friday, May 09, 2003 By: VenAmCham

Venezuelan American Chamber of Commerce (VenAmCham) chief economist Jose Gregorio Pineda says the pressure on price behavior now being felt is strong enough to project an inflation rate exceeding 50%.

"Price behavior has been affected by the price and exchange controls, plus the deep plunge of purchasing power among the Venezuelan population ... inflation has been somewhat erratic in the last few months, through the overall trend has been upward, even if a little less intensively since February's surge."

Pineda points out that the variation of the Consumer Price Index (CPI) for the Caracas Metropolitan Area (CPI-CMA) was 0.9 points in April, higher than the previous month's 1.7% ... that put the cumulative variation so far this year at 11.2%.

The VenAmCham economist also said that a breakdown shows accelerating price variations for four categories of the 13 that comprise the CPI, the most important of which is Food & Non-Alcoholic Beverages, which rose by 1.6% (5.3 points more than in March). Transportation prices increased by 2.4% (compared to a 0.8% decline in March), due to higher vehicle prices, taxi fares, and air fares.

"The prices of uncontrolled goods and services rose 2.1% in April, less than in the previous months. The conjunction of such factors as short supplies of certain products and contraction of demand brought about a slowdown in price variations in April. The variation of housing rentals increased from 1% to 1.4%, however."

Among the categories in which price variations were smaller in April were: Recreation & Culture (from 6.9% in March to 0.5%), Alcoholic Beverages & Tobacco (from 8.6% to 4.7%), Household Equipment (from 5.3% to 3%), and Communications (from 3.3% to 1.2%). The last category reflected a residential telephone rate increase offset by loser prices for cellular telephones and stable prices for cellular phone and Internet use.