Prices Falling Now, Should Rise Later

June 5, 2009

The most recent Consumer Price Index (IPC) reveals that prices are dropping for the first time since 2000, at a rate of 0.12 percent throughout May, according to the latest report from the National Statistics and Census Institute (INEC).

The results may reflect an increase in frugality, as people try and save more in case of hardships they might face in the future, said Manuel Chavez, a statistical technician with INEC.

“What the people are buying and what they’re spending is only for the basics,” Chavez said. “If I still produce a lot, but people are not buying, then prices are going to drop.”

Since January, the index is still up, with just over 1 percent inflation, the IPC indicated. Over the past year, however, the index has still posted an increase of over 9 percent – indicating the heights from which the inflation rate has fallen.

Prices fell across the board throughout May, with every indicator hovering below or just above zero.

The variation shown in the IPC is a natural outcome of the current economic difficulties, Chavez said, and prices should begin to increase as security makes its way back into the consumers’ mindsets and bank accounts.

Prices for alcoholic drinks and cigarettes – which generally register the highest rates of price inflation – were the only ones to rise more than 1 percent during the month of May. Of the other 11 sectors, eight grew at rates of disinflation – a slowing of previous inflation rates – while three sectors registered deflation.

The price of non-alcoholic drinks and food dropped the most, with prices lowering on average by 1.02 percent.

After gasoline prices rose over 6 percent during April, prices fell more than 2 percent during May.

The January through May inflation rate, which usually hovers around 5 percent, dropped to just over 1 percent. It had not dipped below 4 percent in the past four years.

 

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