Food prices will moderate in the coming months

Food prices have played a determining role in the behavior of inflation in recent months, remaining in double-digit values.

In the past month, the annual inflation rate for food and beverages reached 10.31%, almost double the general inflation rate that stood at 5.88% in Metropolitan Lima.

Despite this, it was lower than the 12.89% registered in June and more than six percentage points below the 16.41% in May, according to the National Institute of Statistics and Informatics (INEI).

In fact, as the above data shows, Adrian Armasmanager of Center for Economic Studies of the Central Reserve Bank of Peru (BCRP), highlights that as of the fifth month of this year, food prices have shown a trend towards moderation.

“The part of the increase in prices of food and beverages continued until the month of May and from there it begins to moderate and this trend is expected to continue,” said the official during the presentation of the report. Monetary Program August 2023.

In addition, he added that this trajectory will contribute to the reduction of general inflation, aiming to place it at levels close to the target range (between 2% and 3%) by the end of this year, until reaching that figure during the next year.

Likewise, Armas mentioned that the increase in food prices in the previous months was due to “idiosyncratic factors” such as roadblocks, the El Niño phenomenon and the effect of bird flu.

However, it indicates that the risks associated with climatic factors remain for the coming months. This is due to the fact that by the summer of 2024 there is a 40% probability of a weak child and a 35% probability of a modeled child and a 12% probability of a strong or very strong Global Child, he mentions.

It is important to indicate that inflation in July without considering food and energy reached only 3.39%.

Food prices in July

According to the INEI, onions were the most representative element of the basic basket that experienced the highest price increase in July, presenting an increase of 34.94%. During this month, this product was sold at an average of S/4.85 per kilogram in the Great Wholesale Market of Lima (GMML).

He also highlighted the increase in the cost of eviscerated chicken, which increased by 3.77% and remained around S/10 per kg in the retail markets of Lima; Something similar was recorded in the price of lemons, which rose by more than 28%.

Prices to the first semester

On the other hand, considering the main crops that are grown in the country and that have also been affected by the climate crisis, the potato is the food that experienced the greatest increase with an increase of 30.4% year-on-year in the first half of this year. year, reaching an average value of S/1.66 per kg, according to the Ministry of Agrarian Development and Irrigation (Midagri).

Along the same lines, starchy yellow corn rose 24.4% from S/3.55 kg to 4.42 kg. Prices also rose corn corn in 19.4%, quinoa (15.8%) and rice (8.7%).

GDP would have fallen 0.5% in the second quarter of 2023

• The Peruvian economy ended the second quarter of the year with a negative performance, experiencing an estimated fall of 0.5%, according to the BCRP.

• The negative performance of the fishing sector and the lower development of the primary sector during June are factors that contributed to this result.

• Projections point to June GDP contracting between -0.5% and 0.7%.

• It is important to mention that the MEF had initially forecast a fall of close to 1% for GDP in June; however, it later updated its forecast to 0% due to the good performance of the mining sector.

The word

Approach. Adrián Armas, BCRP Economic Studies

“A downward trend in year-on-year inflation is expected, reaching close to the target range at the end of the year (…) due to the moderation of food and energy prices.”