Annual inflation continues to fall in Colombia: it reached 11.78% in July

Gas station workers fill fuel tanks in Cali on June 8, 2023. Jair F. Coll (Bloomberg)

Colombian inflation continues its slow decline. July is the fourth consecutive month in which it has been reduced, this time reaching 11.78% annual compared to 12.13% in June. According to the figures presented on Tuesday afternoon by the National Administrative Department of Statistics (DANE), the biggest impediments to the continued decline in prices are the increases in gasoline that the Government has decreed to reduce the fuel subsidy. . During July, the Consumer Price Index (CPI) increased by 0.5%, below the 0.81% reported in the same month of the previous year.

Despite the reduction, the drop is less than expected. “Our result is above what the analysts were expecting on average,” explained the director of DANE, the demographer Piedad Urdinola. She was referring to the monthly increase of 0.5%, since on average the analysts studied by the Banco de la República expected it to be 0.3%. In annual terms, the expectation was that the CPI would remain at 11.64%.

The item that most promoted the increase in inflation, as has occurred in recent months, is transportation. It grew 1.07%, well above the other items and driven by the increase in the price of gasoline, which the Petro Government has been increasing from 9,180 pesos per gallon in August 2022 to 13,964 for this month of August, an increase of more than 47% in one year.

The other side is that the increases are coming to an end: the Minister of Finance, Ricardo Bonilla, has said in several interviews that the price of fuel will stop rising somewhere between 15,000 and 16,000 pesos per gallon. At that point, gasoline would no longer be subsidized by the State, which closes a relevant tax gap and discourages the use of private vehicles.

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Food prices, which have been the other major factor in the inflation spike since 2021, have been moderating. In July they grew 0.22%. However, as Urdinola explained, the deferred effect of this increase is still felt in another category: restaurants and hotels, which pushed prices up by presenting an increase of 0.68%.

The good news, from the social point of view, is that inflation has stopped penalizing the most impoverished. In the division by income levels used by DANE, the poorest were the ones who saw their purchasing power decrease the most, largely because they spend a larger portion of their income on food. In contrast, so far in 2023, while for high-income families inflation has reached 7.35%, for the poor it is 5.63%; For its part, the middle class has seen a deterioration of 6.63%.

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