By Lisa Flueckiger, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Inflation in Brazil is showing signs of slowing down this July, growing by only 0.24 percent after months of registering steady price hikes. This marks a decrease from last month’s 0.74 percent increase in inflation and is mainly due to a fall in food prices, according to the General Market Price Index (IGP-M), which takes into account wholesale, consumer and construction costs.

Inflation Slowing in July, Rio de Janeiro, Brazil News
Lower food prices in Brazil are driving a decrease in inflation in July, photo by Luiz Fernando and Sonia Maria/Flickr Creative Commons License.

However, economists expect inflation to keep growing in the coming months. Construction, as well as the retail and the wholesale sector in general saw lower prices in July, which accounted for the lower inflation rate.

Mainly responsible for the decrease were price reductions in fresh food, as wholesale prices fell by 6.18 percent, according to Professor Salomão Quadros, from the Economics Department at Fundação Getúlio Vargas (FGV), a private university.

The prices for tomatoes, which became the symbol of inflation in the past months, fell by 43.5 percent.

While staples like tomatoes may become affordable once again, Professor Quadros expects retail prices to soon grow and reach a worrying stage for consumers, mainly because prices for agricultural raw materials went from 1.25 in June to 1.63 percent in July.

Some important agricultural products, such as poultry and wheat, saw price hikes of 1.27 percent and 9.88 percent, respectively. Adding to the worrying inflation in Brazil is the current increase of the dollar, as imported products and commodities priced dollars become even more expensive due to the currency difference. Manufacturing materials and input commodities increased by 1.15 percent in June and 1.44 in July.

Despite those hikes, Quadros expects that inflation in Brazil over the entire year will remain within the 6.5 percent limit set by the Central Bank for 2013. This forecast had also been confirmed by President Dilma Rousseff in a speech to the Council for Economic and Social Development in Brasília on Wednesday, July 17th.

Recently, inflation in Brazil, especially of food prices, had been worrying investors and consumers alike, affecting consumption negatively. In 2012, inflation ended the year above target, adding to an overall poor performance of the Brazilian economy.

Read more (in Portuguese).

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