Brazil has deflation of 0.29% in September within the IPCA and collected drops to 7.17%

With deflation for the third consecutive month, accumulated IPCA reached 7.17%

THE inflation in the National Broad Consumer Price Index (IPCA), the main Brazilian inflation index, closed the month of September with a drop of 0.29%. The result was released this Tuesday, 11, by the IBGE.

• In the accumulated 12 months, inflation was 7.17%, compared to 8.73% in the accumulated until August.
• In the nine months of this year until September, the accumulated increase is 4.09%.
• The September result represents for the third consecutive month a deflation, when there is a negative variation in the index. In August, inflation had already changed negatively by 0.36% (see chart below).

The IPCA result came slightly below the market consensus, which expected monthly deflation of 0.33% and accumulated falling to 7.12%, according to Bloomberg consensus.

Usually, a deflation happens when the economy is slowing down. But, in the case of Brazil, the drops have been driven mainly by the exemptions on inputs such as fuel and electricity, approved in Congress, in addition to lower oil prices on the international market. In the case of food, the end of the off-season also benefits some crops, such as milk, helping to reduce pressure on prices.

In September, the biggest negative impact on the IPCA came again from fuels, which fell by 8.50% in the month.

“Fuel and, mainly, gasoline have a very large weight within the IPCA”, said in a note the manager of the survey at IBGE, Pedro Kislanov. “In July, the effect was greater due to the establishment of the maximum ICMS rate, but, in addition, we have seen reductions in the average price of fuel sold to distributors, which has contributed to the continued fall in prices.” With the drop in international prices, Petrobras has reduced the price of gasoline four times since July.

Food also fell in the month (-0.51%) for the first time since November 2021.

Brazil has been living with double-digit inflation since September last year, with inflation at one of the worst levels since the beginning of the Real Plan. With the recent declines, the country has returned to single-digit inflation (see chart).

In this week’s Focus bulletin, which brings together projections from the main banks and analysis houses compiled by the Central Bank, the estimate is that the IPCA will close 2022 at 5.71%. For 2023, the median of the Focus projections was 5.0%.

Gasoline keeps falling, milk gives a truce

Of the nine groups surveyed by the IBGE, four fell in September and the others rose. The main increases came from “Housing” (0.60%), “Clothing” (1.77%) and “Personal Expenses” (0.95%).

In Housing, one of the highlights was the rise in residential electricity, which rose 0.78% in the monthafter having already risen 1.27% in August, amid tariff readjustments in some capitals.

Meanwhile, the biggest drop was again in the group “Transport” (-1.98% in September, after another drop of -3.37% in August)which includes fuels.

• gasoline fell 8.33% in the month;
• the ethanol dropped 12.43%;
• the diesel oil dropped 4.57%;
• the vehicle gas fell 0.23%.

The drop in gasoline, individually, had the most intense negative impact (-0.42 pp) among the IPCA sub-items, according to the IBGE.

Despite the greater impact on the index coming from transport, the biggest absolute drop in the month was in the “Communication” group (-2.08%), driven by internet access (-10.55%) and for telephony, internet and pay-TV (-2.70%).

Meanwhile, the main highlight was the group “Food and drinks”which went from a 0.24% rise in August to a 0.51% drop in September, the first drop since November 2021.

• Food at home fell by 0.86%with emphasis on fall in the price of long-life milk, which fell 13.71%.

Despite the reduction, milk continues with an accumulated high of 39.6% in 12 months. “Milk had been going up a lot in the last 12 months, especially in 2022, because of the off-season, from March and April, but also because of the war in Ukraine, which greatly increased the price of agricultural inputs. Now, with the end of the off-season and the return of the rains, the supply of the product on the market has increased, which has led to a drop in prices”, said Kislanov, from the IBGE.

• Among the highlights, soybean oil fell 6.27%;
• And in the highs, onion rose 11.22%.

The international drop in commodity prices that made fuel cheaper also applies to soybeans. “In the case of soybean oil, the explanation comes from the reduction in the price of soybeans in the international market, which has been falling since the end of June,” said Kislanov.

• Within the food group, the food away from home continued to rise, with a rise of 0.47%, but decelerated compared to August (when it had risen 0.89%).
• Source: Exam