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By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The National Consumer Price Index (IPCA) in Brazil registered a deflation of 0.23 percent in June, according to the IBGE (Brazilian Statistics Bureau). This is the first negative result registered in eleven years and the lowest for the month since the beginning of the Real Plan economic plan, in 1994.

Brazil,Retailers promoted sales due to lower purchasing power by consumers, driving food prices down in June
Retailers promoted sales due to lower purchasing power by consumers, driving food prices down in June, photo by OS2Warp/Wikimedia Creative Commons.

“The three most important groups for the domestic household budget have fallen, affecting the main expenses of the population: food, housing and transportation,” said IBGE price index coordinator, Eulina Nunes, noting the decline in electricity and transportation tariffs as well as food.

IBGE data showed that electric bills, which in May increased by 8.98 percent fell in June by 5.52 percent. The entity also highlighted the fact that fuel prices fell by 2.84 percent during the month, causing the transport group to close down by 0.52 percent.

According to Nunes, the food and beverage segment, which represents 26 percent of the IPCA index fell by 0.5 percent. “This decline in prices reflects the positive results of the harvest and the effects of the reduction in the purchasing power of the population, which led retailers to offer sales and promotions,” concluded Nunes.

As a result, inflation for the first six months of the year closed at 1.18 percent, much lower than the 4.42 percent registered in the first half of 2016. According to the IBGE this is the lowest result for the first semester in the historical series. In relation to the last 12 months, the index accumulated an inflation rate of 3 percent.

The latest Focus Report released by the Central Bank on Friday shows that market expectations for the IPCA for 2017 is at 3.38 percent.

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