After increases in services, what salaries does a typical family need

In September 2021, the basket of services was $101.66, while in September 2022 this same family should spend $118,928. The details

By Damián Di Pace – Economic Analyst

22/09/2022 – 09,40hs

It will be difficult for the Government to lower the inflation for the rest of the year finding a new monthly floor of 6%. Although he is trying to establish so many changes in economic expectations with the arrival of Sergio Massa, in recent weeks measures have been taken such as an increase in the monetary policy rate, budget adjustments (rate segmentation), entry of dollars in the form of international loans to swell the reserves of the Central Bank of the Argentine Republic (BCRA), partial and temporary exchange split for the liquidation of dollars from the field. All fiscal and monetary measures that would stop the shooting of financial dollars and calm the inflationary effects.

However, the political anchor continues to resist on the front of the government coalition most concerned about the attack and legal cases of Cristina Fernández de Kirchner, granting testimonial support to the economic plan but not accompanying in the real field, increasing appointments to the floor of the Senate, increasing public spending and generating greater conditioning and pressure on adjustment in the private sector.

The market responds with disbelief and caution before the ambiguous economic policy plan. The correction of the relative prices of the economy puts pressure on family spending with a greater increase in the coming months in the services category.

A typical family already feels the impact of the fiscal adjustment

A typical family of 4 members (two adults and 2 school-age children) is already beginning to feel the fiscal adjustment in its home administration with the new rate scheme, where electricity (removal of subsidies in 3 tranches of 20%) that paid $4,500 in September 2022, would end up paying $7,776 at the end of March 2023; Water (It is expected that in November there will be 45% of the subsidy, in January 2023 30% and March 2023 15%) would go from paying $800 to $3,900. The same would happen with Gas (increases in three tranches, 20%, 24% and 26%) with which the value goes from $3,500 in September to $5,468 in March 2023.

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Regarding the service of rental for a 3 room apartment (a contract was taken in March 2020 at $40,000 and was adjusted by the BCRA Lease Contract Index for 2021 and finally by the REM data), this family began to pay $60,000 as of March 2021 and will pay $114,000 to from March 2023.

This is only part of the fiscal adjustment to meet the goal with the IMF and avoid a further escalation of inflation. By taking other necessary services and adjusting them for inflation (we use the REM data to adjust prices, because for this month all the increases were already given, although it is not ruled out that there are others due to inflation), the insurance of a car it would go from $11,300 to $15,640; Internet from $3,800 to $5,259 and Cable and Streaming from $3,800 to $5,121.

Inflation, in all areas

Other increases planned for the coming months are the taxi service (it is assumed that the family uses it occasionally at least 1 time a week, thus expecting increases of 30% and another 20% for the coming months) for which the cost goes from $6,500 to $10,140; expenses (an increase in tranches of 10%, 15% and 10% is expected in the coming months) therefore, it is possible that it goes from $12,500 to $17,394; family prepaid for 4 people (a readjustment of 105% is expected by the end of the year), with which a rise from $27,000 to $35,232 is expected by the end of March 2023.

Finally, we have services like private schools (it is assumed that the school has a state subsidy), telephony (only adults have a mobile), and the use of fuel already had increases in this month of September and no further increases are planned until the end of the year, but in the same way they do not any adjustment is ruled out if, due to inflationary reasons, the values ​​should not lose the purchasing power of these services.

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To see all this in perspective, in September 2021 the basket of services was $141,668, while in the same month of 2022 this same family should spend $178,928, thus expressing that the year-on-year increase was 26.28%. Now with all the price adjustments planned for the coming months, they would go to the value of $265,259, that is, an expected increase of more than 48.25% (remember that it was previously mentioned that there are services such as fuel or schools, which have already increased but it is expected that they may have rises in the coming months, for which the percentage variation may increase more than proportionally).

It is important to remember that This typical family of 4 members is only paying the cost in services, but the value of a Basic Food Basket should still be added (adjusted for inflation it would amount to $52,928), rentals, leisure and recreation and home equipment, among others; Therefore, it is to be expected that the typical family must receive at least two minimum wages (SMVM $51,200) in order not to fall into the indigence line, and at least earn three median wages ($94,000 median wage) to be above the poverty line.

This tour of the basket of services both for this month and the future increases for March 2023, allows us to see that the price scheme puts a high floor on inflation for the coming months.

The Government is trying to contain the problem and tries to “roll” it for later, since they are very short-term measures that only generate provide more time and oxygen in the short term.

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In reports such as the Market Expectations Survey of the Central Bank of the Argentine Republic, it is expected to end in 2022 with more than 95%, a figure that coincides with the values ​​of average price increases of 2.5% in just one week. If annualized, inflation will unfortunately reach 3 digits at the end of 2022.

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