Brazil inflation hits 0.87% in August, the highest for the month since 2000

RIO DE JANEIRO, BRAZIL – Brazil’s inflation in August was once again above market expectations. The National Wide Consumer Price Index (IPCA) reached 0.87%, the highest for the month since 2000. In July, the indicator had been 0.96%.

The data, released this Thursday (9/9) by the Brazilian Institute of Geography and Statistics (IBGE), show that in 12 months, inflation has accumulated 9.68%. Compared to August last year, the increase was 0.24%.

INFLATION BY GROUP

Eight of the nine product and service groups experienced price hikes in August, especially transportation. Driven by fuels, the group registered the highest variation (1.46%) and the greatest impact (0.31 p.p.) on the general index.

Gasoline rose 2.8% and had the greatest individual impact (0.17 p.p.). Ethanol (4.5%), vehicular gas (2.06%), and diesel oil (1.79%) were also more expensive this month.

“The price of gasoline is influenced by the readjustments applied at the refineries. The dollar, the international market prices, and the increase in biofuel prices influence the costs, which are passed on to the final consumer. In the year, gasoline accumulates a high of 31.09%, ethanol 40.75%, and diesel 28.02%,” said the research analyst André Filipe Guedes Almeida.

The prices of piped gas (2.70%) and bottled gas (2.40%) also went up. For piped gas, there were price readjustments in Curitiba and Rio de Janeiro.

On the other hand, the health and personal care group (-0.04%) was the only one with a negative variation due to the 0.43% drop in personal hygiene items. Health insurance plans dropped 0.10%.

The survey also shows that all the regional areas surveyed had inflation in August. The highest index was registered in Brasília (1.40%), influenced by the hikes in gasoline prices (7.76%) and electricity (3.67%). The lowest result was in the metropolitan region of Belo Horizonte (0.43%) due to the drop in airfares (-20.05%) and water and sewerage rates (-13.73%).

CEILING

Since March, the index has only moved away from the government’s 5.25% inflation target for this year.

To control the rise in prices, the Central Bank raised the Selic rate, which regulates interest rates in the country, from 4.25% to 5.25% per year. With this, the monetary authority seeks to convey a tougher message to discourage fiscal expectations for next year.

“Changes take time to affect the economy. The higher Selic discourages the economy through the credit and expectation channel. If a trader, for example, doesn’t believe that the hike is temporary, he regulates his prices with this in mind. There is an anchoring of expectations,” said the head of Economics at Rico Investimentos, Rachel de Sá, to Metrópoles.

The National Consumer Price Index (INPC) rose 0.88% in August, 0.14 p.p., below the July result (1.02%). In the last 12 months, the indicator has accumulated a 10.42% hike.

Foodstuff products rose 1.29% in August, above the July result (0.66%). Non-foodstuff products rose 0.75%, while in July, they had registered 1.13%.

All regional areas registered increases in August. The lowest index was observed in Fortaleza (0.43%), where rice prices (-2.81%), meat (-2.09%), and personal hygiene items (-1.39%) were the main culprits. Brasília registered the highest variation (1.60%), influenced by gasoline (7.76%) and electricity (3.67%).

In July, the IBGE began the gradual resumption of face-to-face price collection in some establishments. Due to the Covid-19 pandemic, since March of last year, the collection had been carried out exclusively by other means, such as websites, telephone, or e-mail.

The IPCA covers products and services used by families with incomes of one to 40 minimum wages, while the INPC covers families with incomes of 1 to 5 minimum wages, living in the metropolitan regions of Belém, Fortaleza, Recife, Salvador, Belo Horizonte, Vitória, Rio de Janeiro, São Paulo, Curitiba, Porto Alegre, besides the Federal District and the cities of Goiânia, Campo Grande, Rio Branco, São Luís and Aracaju.