Inflation preview

With a deflation of 0.38% in May, IPCA registered the lowest rate in 22 years

Section: Economic Statistics | Umberlândia Cabral

June 10, 2020 09h00 AM | Last Updated: June 12, 2020 10h55 AM

Drop in the gasoline price pressed deflation of 0.38% in May - Photo: Licia Rubinstein/IBGE News Agency

Pressed by the drop of 4.56% in fuel prices, the country registered a deflation of 0.38% in May, after the decrease of 0.31% in April. It is the second consecutive month of price drop and the lowest rate since August 1998, when it had been -0.51%. The data are from the Extended National Consumer Price Index (IPCA), released today (10) by the IBGE.

In the cumulative rate in the year, the index recorded a decrease of 0.16%. In the last 12 months, the IPCA has cumulated an increase of 1.88%, below the government inflation target of 4% for 2020, which a tolerance of 1.5 percentage points above or below.

The biggest negative influence in this month´s index came from the group of Transportation (-1.9%), boosted especially by the drop in fuel prices (-4.56%). “Gasoline is the main subitem in terms of weight within the IPCA and, by dropping 4.35%, it pulled the Transportation results downward, as well as airfare that had a decrease of 27.12% and reported the second biggest negative contribution to the IPCA of May”, explains the survey manager Pedro Kislanov.

Other groups that registered decreases in May were wearing apparel (-0.58%) and housing (-0.25%). Regarding wearing apparel, the IPCA reported a drop in women´s clothes (-0.88%), footwear and accessories (-0.74%), men´s (-0.55%) and children’s clothes (-0.29%). In housing, the main negative contribution came from electricity, which retreated 0.58%. On May 26th, the Brazilian Electricity Regulatory Agency (Aneel) announced that will maintain the green tariff flag, without any additional charge in the electricity bills until the end of the year.

The biggest growth in this month´s index came from the group of household articles (0.58%), boosted by the high in TV, sound and computer articles (4.57%). “This increase may be related to the dollar, with the pass-through effect, when the change in the exchange rate affects prices in the economy. Electronic articles are usually more affected because they have many imported components. Therefore, the real devaluation also ends up impacting the prices of these products”, analyzes the manager.

In May, the prices of household appliances and equipment increased 1.98%, whereas those of furniture fell 3.17%.

Foods decline in May

The group of food and beverages (0.24%) decrease in relation to April, when it grew 1.79%. The prices of some items such as carrots (-14.95%) and fruits (-2.1%), which had increased in April, decreased in May. As a result, they helped the figures of food at home to change from 2.24% to 0.33%. Food away from home also declined from April (0.76%) to May (0.04%).

“It is normal for food to increase in the beginning of the year, especially in the first three months, due to climatic issues that affect the crops. As a result, there is a specific rise in some foods. And others, in May, behave differently. With better climatic conditions, they start to be restocked in the markets and, consequently, a drop in the price”, explains Kislanov.

After four months in a row of decline, meats increased 0.05%. The prices of onion (30.08%), potatoes (16.36%) and carioca beans (8.66%) also had increases.

In the regional index, all sixteen areas surveyed had deflation in May. The metropolitan area of Belo Horizonte had the lowest rate, with a retreat of 0.60%, especially due to the drop in the prices of gasoline (-6.61%) and airfare (-28.14%). On the other hand, the highest rate was reported by the metropolitan area of Recife (-0.18%), due to the high in the prices of onion (31.31%) and new cars (1.86%), as well as the less intense drop in the gasoline prices (-3.59%).

Due to the Covid-19 pandemic, the IBGE suspended, on March 18th, the on-site collection of price data. Since then, prices have been collected by other means, such as search on websites, telephone, or email. For the calculation of this month index, the prices collected from April 30 to May 28, 2020 (reference) were compared with those in effect from March 31 to April 29, 2020 (base).