Indeed, at the level of primary and secondary activities, including manufacturing, there have been shocks on the supply side that affected various economic branches and in numerous categories.
However, these shocks are focused or sectorized and have not been expansive nor have they impacted on the entire supply of goods and services in the country. For a sample, we can visualize the trend series of the national producer price index, a demerited series little used in the analysis, which, nevertheless, is a useful thermometer of inflationary pressures on the producer side, and that, in fact , are verified in consumer prices.
This series presents only a strong increase in April 2020 at an annual rate (beginning of the pandemic), to later stabilize. In other words, the price pressures experienced by producers were temporary and have not generated a consistently upward inertia, from that date to today.
Furthermore, the transitory shocks that impacted the producers were more reflected in the primary activities of the economy, such as agriculture and livestock. There is no abnormal inflation in secondary and tertiary activities, except in the production of intermediate goods. The primary sector is highly volatile and cyclical in its prices and it seems that its rise responds more to cyclical factors than to conjunctural situations, such as the pandemic.
The point is that, the inflation of consumer prices that has been registered in recent months is due much less to shocks on the supply side than to monetary factors.
Furthermore, it is clear that the transitory characteristic that the central bank saw regarding the increase in prices has already been overtaken by a real inflationary inertia that can no longer be explained by isolated supply shocks.
So where is current inflation coming from?
The series that can help to elucidate this is one of the monetary aggregates, such as the amount of money in the economy, or the amount of money as a percentage of the product (GDP). With a strong recession in 2020 and a slow recovery in the economy, real GDP today is almost a trillion pesos lower than in 2019.
However, the amount of money in the system has consistently grown at a double-digit rate from 2020 to date. Its atypical growth is due precisely to the quantitative laxity required by the monetary authority for the target rate for 2021 to be achieved.