Official Inflation Slows to 0.13 Percent in May

By Contributing Reporter

RIO DE JANEIRO, BRAZIL – The Broad National Consumer Price Index (IPCA), considered Brazil’s official inflation index, stood at 0.13 percent in May, representing a slowdown compared to the 0.57 percent rate in April, according to the Brazilian Institute of Geography and Statistics (IBGE), as reported on Friday, June 7th.

It was the lowest result for May since 2006 (0.10 percent). It is also the lowest monthly index of the year to date, primarily reflecting the decompression of prices in the food and beverage sector, which once again showed deflation. Low inflation is related to the slowdown in the country’s growth: with demand falling, prices tend to retreat.

In the first four months of the year, however, accumulated inflation stood at 2.22 percent, the highest rate for the period since 2016, when it stood at 4.05 percent.

In twelve months, the accumulated index retreated to 4.66 percent, below the 4.94 percent registered in the previous twelve months. Despite the slowdown, the rate remains above the government’s central inflation target for 2019, which is 4.25 percent.

The result was lower than expected by the market. Median of consultancy and financial institution projections reported by Valor Data was 0.20 percent in May. For twelve months, forecasts were for a rise to 4.73 percent.

Of the nine product and service segments surveyed by IBGE, four registered deflation in May. The main contributor to the general index slowdown came from “food and beverages” (-0.56 percent), following a 0.63 percent hike in April. This sector alone accounted for an impact of -0.14 percentage points (p.p.) on inflation for the month.

On the upside, the most significant pressure came from the “housing” sector (0.98 percent), with an impact of 0.15 p.p. on the general index, and “health and personal care” (0.59 percent), with an impact of 0.07 percentage points.