June 11, 2010 / 7:44 PM / 10 years ago

UPDATE 1-Argentina inflation slows slightly in May

* May inflation at 0.7 pct vs 0.8 pct in April

* May reading matches forecast in Reuters poll (Recasts, adds analyst quote, details)

BUENOS AIRES, June 11 (Reuters) - Argentine consumer price inflation slowed slightly to 0.7 percent in May as food prices eased, the government said on Friday, but analysts said the real rate was nearly twice as high.

A Reuters poll of 16 market analysts gave a median inflation forecast of 0.7 percent for the month, with estimates ranging from 0.5 to 1.6 percent.

Analysts said the slowdown in inflation was caused by a dip in food costs, particularly beef prices, which rose some 60 percent between November and March.

“Beef prices leveled off in April and finally came down this month.” Marina Dal Poggetto, an analyst for the Miguel Bein Consulting Group, said before the official numbers were released.

Consumer prices rose 0.8 percent in April.

The inflation rate in the 12 months through May was 10.7 percent, the INDEC national statistics agency added, with inflation in the first five months of the year at 5.1 percent.

Argentina’s consumer price data is widely discredited and economists, the opposition, and former INDEC employees accuse the government of under-reporting price rises for political gain and to save money on repayment of inflation-linked bonds.

Food prices, which climbed 1.1 percent in April, rose 0.6 percent in May, the government said. Education costs rose 3.4 percent and clothing was up 1.1 percent.

President Cristina Fernandez has tried to slow inflation using a mix of price controls and export curbs, shunning orthodox monetary policy.

Government officials rarely refer to inflation in public, instead call it “price readjustments.”

Inflation is a particular concern for Fernandez’s government because it has a larger impact on the poor, who make up her support base, and this could weaken her politically.

Public spending is surging at a rate of about 30 percent, and analysts say the use of central bank reserves to service debt is also stoking inflation.

Price rises have also eroded the advantage Argentina’s weak peso has given local exporters.

Unions are demanding pay hikes of around 25 percent to make up for what most say is a real annual inflation rate of at least 20 percent. (Reporting by Kevin Gray; Writing by Luis Andres Henao; Editing by James Dalgleish)

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