IPCA: Brazil has deflation of 0.36% in August, influenced by fuels
It is the lowest index for a month of August since 1998, that is, in 24 years. In the last 12 months, the increase is 8.73%, the lowest since June 2021.
The Broad National Consumer Price Index (IPCA), considered the country’s official inflation, was -0.36% in August, according to the Brazilian Institute of Geography and Statistics (IBGE) this Friday (9). It was the second straight month of deflation.
The index is the lowest for a month of August since 1998 – that is, in 24 years. Once again, the drop was mainly influenced by the retraction in fuel prices.
The fall was less intense than that registered in July (-0.68%), when the rate was the lowest since the beginning of the historical series of the survey, in January 1980. Since the Real plan, Brazil has registered 16 times deflation .
Some factors explain the smaller drop compared to July, according to the research manager, Pedro Kislanov. One of them is the less intense retraction of electric energy (-1.27%), which had been 5.78% in the previous month, as a result of the reduction of ICMS rates.
There was also acceleration in some groups, such as health and personal care (1.31%) and clothing (1.69%), and the less strong fall in the transport group in August.
“In the previous month, the prices of gasoline, which is the most important item in the group, had fallen 15.48% and, in August, the retraction was smaller (-11.64%)”, he explained.
In the last 12 months, the increase is 8.73%, the lowest since June 2021 (8.35%) – with this, the indicator returned to below double digits for the first time in a year. In the 12 months immediately preceding, the increase had been 10.07%.
In the year, the IPCA accumulates a high of 4.39%. In August 2021, the change had been 0.87%.
Fuels are once again the highlight
As in July, deflation came mainly from the fall in Transport (-3.37%), which contributed -0.72 percentage point (pp) to the index for the month. The highlight comes once again from the drop in fuel prices (-10.82%).
According to the IBGE, in August, the prices of the four fuels surveyed dropped: vehicular gas (-2.12%), diesel oil (-3.76%), ethanol (-8.67%) and gasoline (-11.64 %) – in the latter case, the negative impact was the most intense (-0.67 percentage point) among the 377 IPCA sub-items.
The IBGE recalls that the price of gasoline at refineries was reduced by R$ 0.18 per liter on August 16.
Already the prices of air tickets (-12.07%) also retreated, after four months of highs. For the research manager, seasonality is one of the explanations for this result.
“This is a comparison with July, which is a vacation month and there is an increase in demand. In addition, there were four consecutive months of highs, which raises the basis for comparison. There is also the impact of reducing jet fuel in this period,” he explains.
In addition, the Communication group also experienced deflation, with an impact of -0.06 pp on the general index. On the upside, the highlight was Health and Personal Care, which contributed 0.17 pp in August. Food and Beverages decelerated in relation to July, with an impact of 0.05 pp The Clothing group had the biggest positive change in the IPCA in August.
- Food and drinks: 0.24
- Housing: 0.10
- Household items: 0.42
- Clothing: 1.69
- Transport: -3.37
- Health and personal care: 1.31
- Personal expenses: 0.54
- Education: 0.61
- Communication: -1.10
Tomatoes, milk and light: other fall highlights
In the Food and beverages group, the result of food at home (0.01%) was close to stability. There were increases in important components in the families’ basket, such as chicken pieces (2.87%), cheese (2.58%) and fruits (1.35%).
On the other hand, there were significant drops in the prices of tomatoes (-11.25%), potatoes (-10.07%) and soybean oil (-5.56%).
In addition, the price of long-life milk, which had risen 25.46% in July, dropped 1.78% in August, contributing -0.02 pp to the index for the month.
“In recent months, milk prices have gone up a lot. As we are approaching the end of the off-season period, which should continue until September or October, this could improve the situation. But in the previous month, the increase in milk was 25.46%, that is, prices fell in August, but are still high”, says Kislanov.
The change in eating away from home (0.89%) was close to that of the previous month (0.82%). While the meal went from 0.53% to 0.84%, the snack slowed down from 1.32% to 0.86%.
In the 12-month period, the food and beverage group rose 13.43%, well above the 8.73% inflation in the same period. Other groups with greater variation were Household items, Clothing and Health and personal care.
Fuels, on the other hand, accumulated a drop of 7.11%, contributing to the less accentuated rise in transport.
In Housing, there was a drop in residential electricity in August (-1.27%), although less intense than in the previous month (-5.78%).
“The effects of the reduction in electricity rates were more concentrated in the previous month. In some places, like Vitória and Belém, there was still a readjustment in the tariffs in August”, explains Kislanov.
High on clothing, personal hygiene and health insurance
The biggest positive change in the IPCA in August came from the clothing group (1.69%), whose prices had decelerated in the previous month (0.58%). Women’s clothing (1.92%), men’s (1.84%) and footwear and accessories (1.77%) were the main influences in the group’s progress.
The increase of 1.31% in the health and personal care group is related to increases in personal hygiene (2.71%) and health insurance (1.13%).
In the case of the health plan, the monthly fraction referring to the 15.50% readjustment authorized by the National Supplementary Health Agency (ANS) for new plans was incorporated.
In the Education group, in regular courses (0.51%), only postgraduate courses (-1.46%) had a decrease in prices. The biggest changes were in youth and adult education (3.68%), day care centers (1.41%) and technical courses (1.02%).
6 out of 10 items surveyed were more expensive in August
Although deflation was concentrated in a few groups, the rise in prices was more widespread in August. The diffusion index (percentage of items with an increase in the month) accelerated from 63% in July to 65% in August. This means that, of the 377 products and services investigated by the IBGE, 245 had their prices high in the month – in July, 237 were on the rise.
Among the impacts on the IPCA in August, gasoline and personal hygiene stand out. See below:
13 of the 16 surveyed areas register deflation
Regionally, three of the 16 areas were up in August. The biggest positive change was in Vitória (0.46%), influenced by the 11.16% increase in electricity. The lowest result, in turn, occurred in Recife (-1.40%), driven by the 16.23% drop in gasoline prices.
INPC drops 0.31% in August
The National Consumer Price Index (INPC), which calculates inflation for low-income families and is used as a reference for salary readjustments and INSS benefits, dropped 0.31% in August. As a result, the index accumulates a high of 4.65% in the year and 8.83% in the last 12 months. In August 2021, the rate was 0.88%.
In the previous month, there was also deflation in this indicator (-0.60%).
Food products changed from 1.31% in July to 0.26% in August. On the other hand, non-food items had a smaller fall (from a retraction of 1.21% in July to -0.50% in August).
Inflation above target in 2022 and risks for 2023
In 2021, inflation closed the year at 10.06%, well above the target ceiling (5.25%), representing the biggest increase since 2015.
Defined by the National Monetary Council (CMN), the inflation target for 2022 is 3.5% and will only be considered formally fulfilled if it fluctuates between 2% and 5%. The Central Bank has already officially admitted, however, that the inflation target will be missed in 2022 for the second year in a row.
The current projection of the financial market is an IPCA of 6.61% in 2022. For 2023, however, the expectation for the IPCA is 5.27%.
For next year, the inflation target was set at 3.25%, and it will be considered formally met if it fluctuates between 1.75% and 4.75%. In other words, the bets of an overflow of the target ceiling also grow next year.
Even with the indication that the worst is over for inflation, the BC raised the Selic rate to 13.75% – the highest level in 6 years.
Prices set to rise slowly, economists say
Economists point out that inflation should end the year in single digits, with a strong reduction compared to the double digits seen in the first half of the year, however, still above the Central Bank’s target of 3.5%.
“The projection of falling inflation does not mean that prices will fall in general. And yes, that they will go up more slowly. This is because falling inflation is different from deflation – when prices actually fall, as we have seen with gasoline in recent months”, explains Rachel de Sá, head of economics at Rico Investimentos.
Gustavo Sung, chief economist at Suno Research, points out that, for the rest of the year, the effects of higher interest rates, lower commodity prices, food and industrial goods prices, in addition to fuels, may contribute to a slowdown in inflation. However, fiscal measures that support demand can put pressure on prices.
“For September, we expect price stability still due to the last adjustment in refineries and a smaller effect from the fuel tax cut”, he says.
Itaú Unibanco forecasts that the IPCA will close the year at 7%, with a forecast of further reductions in the index for the months of September and October. “The fall in prices of milk and dairy products should contribute to deflation in the food group in the coming months”, he informs.