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Peru: Inflation inches up but remains subdued in April

Staff Writer |
Consumer prices in Metropolitan Lima decreased 0.14% month-on-month in April, contrasting March’s 0.49% rise.

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April’s increase was mainly the result of higher prices for food and beverages and for transport and communication. On the other hand, lower prices were recorded for education and culture and for health.

Meanwhile, inflation inched up. It rose to 0.5% in April from 0.4% in March—which had marked the lowest print since December 2009.

In April core consumer prices, which exclude energy and food, increased 0.1% from the previous month, well below March’s subdued 0.8% jump. Finally, core inflation declined from March’s 2.2% to 2.1% in April, the lowest reading in over seven years.

The Central Bank expects inflation to end 2018 at 2.0%. Panelists participating in the LatinFocus Consensus Forecast expect inflation to end 2018 at 2.8%, which is up 0.1 percentage points from last month’s projection. For 2019, the panel expects inflation of 2.7%.

The business confidence indicator rose to 59 in April, above March’s 54. Consequently, the indicator moved further above the 50-point threshold that separates optimism from pessimism, indicating that businesses grew more optimistic in April.

Driving the increase in business sentiment was a broad-based improvement in expectations on the near-future.

Firms had more favorable expectations on demand levels, the company’s economic situation and the sector’s economic situation in the next three months.

That said, they had broadly stable expectations about longer-term prospects, as their expectations on their specific sector of activity and their own company in the twelve months remained virtually unchanged.

Panelists expect fixed investment to contract 4.9% in 2018, which is unchanged from last month’s forecast. For 2019, panel participants see investment growing 3.8%.

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