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Fuels contribute to deflation of 0.31% in April, lowest index in 22 years

Section: Economic Statistics | Caio Belandi

May 08, 2020 09h00 AM | Last Updated: May 08, 2020 11h05 AM

 Gasoline deflation was registered in all the 16 areas surveyed in April - Tony Winston/Brasilia Local Branch

With a decrease of 9.59%  in fuels prices, deflation in the country was 0.31% in April, after recording 0.07% in March. The result is the lowest monthly change since August 1998, when it reached -0.51%. The data come from the Extended National Consumer Price Index (IPCA), released today (8) by the IBGE. The cumulative IPCA in the year was 0.22% and, in the last 12 months, 2.40%.

Transportation, which recorded a decrease of 2.66%, accounted for the main negative impact on the IPCA of April, -0.54 percentage points (p.p.). The decrease of 9.59% in fuel prices was affected by the fall of 9.31% in gasoline, an item which represented the main individual negative impact on the index, of -0.47 p.p.

Gasoline registered deflation in all the 16 areas surveyed, with the highest index in Curitiba (-13.92%) and the lowest in Rio de Janeiro (-5.13%). Ethanol (-13.51%), diesel (-6.09%) and vehicle gas (-0.79%) also recorded decreases in April.

"The result of April was severely influenced by a series of reductions in fuel prices, mainly of gasoline, which fell significantly and pushed the index downwards", says the survey manager, Pedro Kislanov. During the data collection period, there were two instances of fall of gasoline prices: on March 28, of 5%, on April 20, of 8%.

On the other hand, airfares (15.10%) recorded increases after having registered decreases for three months in a row. The item urban bus (0.11%) also recorded a positive change, due to the price adjustment of 5% in fares in Salvador (1.56%), in effect since March 12.

Household articles and housing also led to deflation 

Besides transportation, other five groups had a negative impact on the IPCA of April. The second main contribution came from Household articles (-0.05 p.p.), followed by Health and Personal care (-0.03 p.p) and Housing (-0.02 p.p.), a group influenced by the fall of electricity prices (-0.76%). It is worth mentioning that the green tariff flag remained  in effect in April, and there was no extra charge on electricity bills. Regarding this item, the areas recorded decreases ranging from a decrease of 4.07% to an increase of 3.43% in Porto Alegre.

Also in Housing, the positive change of the water and sewage rate (0.21%) results from the average adjustment of 6.23% in one of the concessionaires in Porto Alegre (1.94%), in effect since March 21. Some cleaning articles (0.10%) also recorded increase.

Food prices remain on a high

The biggest positive contribution to the IPCA of April (0.35 p.p.) came from Food and beverages (1.79%), which remains on a high and accelerated in relation to the result a month ago (1.13%). Food at home changed from 1.40% in March to 2.24% in April, with a highlight to the hikes of onion (34.83%), potato (22.81%), pinto beans (17.29%) and long-life milk (9.59%). Meat (-2.01%) recorded a decrease for the fourth month in a row, with a higher intensity in comparison with the  previous month (-0.30%).

"There is a natural decrease of supply, in the first few months of the year, and of the increase of demand caused by the pandemic of  Covid-19, since people go to the supermarket more often and prepare more meals at home", Kislanov highlights.

Food away from home, in turn, changed from 0.51% in March to 0.76% in April, influenced by the hike of snacks (3.07%). Meals recorded deflation (-0.13%) for the second month in a row. Decrease in March was of 0.10%.

In terms of regional indexes, 14 of the 16 areas surveyed registered deflation in April. Curitiba registered the lowest index (-1.16%), due to the fall of gasoline prices (-13.92%). Deflation was registered in Rio de Janeiro (0.18%), due to hikes in airfare prices (15.83%) and of electricity (1.33%), and in Aracaju (0.15%).

For the calculation of the monthly index, prices collected from March 31 to April 29, 2020 (reference) were compared with those in force from March 3 to 30, (base). For the IPCA-15 calculation, prices were collected from March 17 to April 14, 2020 (reference) and compared with those in effect from February 12 to March 16 (base). Due to the Covid-19 pandemic, IBGE suspended on-site collection of price data on March 18. Since then, prices have been collected by other means, such as search on websites, telephone or email. 

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