Producer Prices

Industry inflation stays at 5.22% in February, biggest increase since 2014

Section: Economic Statistics | Carmen Nery

March 30, 2021 09h00 AM | Last Updated: March 30, 2021 05h24 PM

#PraCegoVer Plataforma de petróleo
With a hike of 12.12%, oil refining sector accounted for main impacts on the index - Photo: André Valentim/Petrobras Agency

Industry prices rose 5.22% in February from January, biggest increase in the Producer Price Index (IPP) time series, initiated 2014. The index performance in February reached its second record figure in a row, after a revision of the January result from 3.36% to 3.55%. As a consequence, the IPP now has cumulative records of 8.95%, in the year, and 28.58% in the last 12 months.

The result released today (30) by the IBGE, reflects, mainly the rise of prices in mining and quarrying industries (27.91%), oil refining and alcohol products (12.12%), other chemicals (9.69%) and basic metals (8.35%). Those are the same sectors accounting for the main influences on the aggregate result: mining and quarrying industries (1.66 p.p.), oil refining and alcohol products (1.04 p.p.), other chemicals (0.79 p.p.) and basic metals (0.56 p.p.). 

That is the ninth consecutive increase in the month-on-month comparison of the indicator - since August 2019. The index measures the evolution of 'factory gate' prices, excluding taxes and freight, of 24 activities in mining and quarrying and in manufacturing industries. A total 23 have recorded positive changes.

“The result gives continuation to a series of positive changes to the index. Important factors to explain the recent paths of industrial prices remain relevant and represent – together with 3.55% in January and a higher figure in February, 5.22% - a movement that has been observed for some months. There has been a continuity in the combination of short-term effects, which translated into figures, result in a cumulative inflation of 8.95% in February,” says the survey technician, Felipe Figueiredo Câmara.

He explains that one of the relevant factors is currency depreciation, which has reached 25% in 12 months. As a result, there has been an effect on the overall productive chain since it affects imported inputs. At the same time, there is a scenario of foreign trade in which the price of mineral commodities – crude petroleum oil and iron ore –, calculated in foreign currency, are also on an upward trend.

“The price of commodities rises in foreign currency and that movement is reinforced by currency depreciation, because the prices of those products in reais, Brazilian currency, is even higher. There is also an effect on inputs. Chemical industry is one of the most significant influences to the month’s result and the rise of prices is associated to the rise of costs of imported raw material. In mining and quarrying industry, there is the direct effect of international prices on products that have an impact on the entire production chain. The rise of crude oil has anon oil derivatives and on iron ore in basic metals and steel industry. That scenario was already observed in January and has been reinforced throughout the last few months, in a way as to explain these record results,” Mr. Câmara explains.

In February, the average change of prices in mining and quarrying industry was of 27.91%, biggest change in the series, surpassing the 19.60% of December 2016. As a result, the cumulative index in the year reached 43.30%, highest result for a month of February; the cumulative index in 12 months was of 87.59%, highest in the series.

Other relevant changes were recorded by oil refining and alcohol products, and other chemicals, on the average, 12.12% and 9.69%, respectively. Oil refining and alcohol products have kept a sequence of positive results since October 2020 (2.35%). In terms of the cumulative index in the year, the change was of 18.04%, the highest for a month of February in the series. In terms of the index in 12 months, there was a change by 18.26%, first positive result after 11 negative results in a row. Other chemicals registered the eighth consecutive time in a row and the highest positive change throughout the entire series. The sector had a cumulative positive change of 40.81% in the last 12 months and of 15.03% in the two-month period, both being the highest figures in their respective series.

As for major categories, the influence on IPP (5.22%) was of 0.02 p.p. from capital goods, 4.50 p.p. from intermediate goods and 0.70 p.p. from consumer goods. In the case of consumer goods, 0.09 p.p., the result was due to price changes observed in durable consumer goods and 0.61 p.p. in semi-durable and non-durable consumer goods.

Indicators of industry prices of mining and quarrying industry and manufacturing industry area calculated according to a specific survey conducted among industrial enterprises. The selected panel consists of 416 products and about 2,000 enterprises, which account for approximately 67% of the net revenue of sales of industrial products and services. The weights attributed to products, enterprises and activities area based on annual industry surveys in 2016. Nevertheless, surveys of 2015 have been used for the selection of products and enterprises.