Producer Prices

Inflation in industry stays at 4.78% in March, second highest rise since 2014

Section: Economic Statistics | Carmen Nery

May 04, 2021 09h00 AM | Last Updated: May 04, 2021 05h20 PM

#PraCegoVer Foto aérea de uma refinaria
The biggest load in the March IPP came from oil refining and ethanol products (1.53 p.p.) - Photo: André Motta de Souza/Petrobras Agency

The industrial prices increased 4.78% in March over February, the second highest rise in the time series of the Producer Price Index - IPP, started in 2014. In February, the record rise was revised from 5.22% to 5.16%. With this result, the index released today (4) by the IBGE, accrues records of 14.09% in the quarter and of 33.52% in the last 12 months.

This is the twentieth consecutive increase in the monthly comparison of the indicator since August 2019. The IPP measures the change in the prices of products at the "factory gate", without tax or freight, of 24 activities of the mining and manufacturing industries. Of them, 23 registered positive changes, repeating the performance recorded in February and January.

The result mainly reflects the rise in the prices of the activities of oil refining and ethanol products (16.77%), other chemicals (8.79%), wood (7.73%) and pulp and paper (7.18%). The biggest influences came from oil refining and ethanol products (1.53 p.p.), other chemicals (0.74 p.p.), food products (0.58 p.p.) and basic metals (0.41 p.p.).

 

Alexandre Brandão, manager of analysis and methodology of the Coordination of Industry, states that the March result reflects the impact of the devaluation of the real against the dollar, which affects both the prices of products exported by Brazil and the prices of imported products, particularly those of raw materials. In the case of cost increase, it produces a cascading effect in a number of industrial chains.

"Many raw materials are highly priced and these rises are spread along several chains. If the price of crude petroleum oil increases, the price of petroleum products increase; if naphtha rises, some chemicals that use it as raw material have also their prices increased and it eventually impacts the plastic sector, which processes some of these chemicals. The same is valid in relation to the price of ore, which impacts basic metals and, later, industries like the car and house appliances industries," explains Brandão.

Another factor that contributed to rise the prices in March was the increase of the international demand, especially from China, impacting the price of commodities, especially the agricultural ones.

"Commodities have increased their prices because the international market is pressed by the demand, particularly that exerted by China for agricultural products, like soybean derivatives and meat, especially beef. Steel and pulp products are also being pressed," states Brandão.

He highlights that food products, the heaviest sector in the economy, did not appear among the major influences neither in January nor in February, when they were the record in the time series. However, they appeared once again in March and, in the perspective of the indicator of the last 12 months, it exerts the biggest influence on the index of 33.52% (7.58 p.p.), followed by mining industries (5.55 p.p.), oil refining and ethanol products (4.70 p.p.) and other chemicals (3.63 p.p.). In any case, mining industries, food products, oil refining, other chemicals and basic metals have appeared as the most influential in at least one out of three indicators – month/previous month, cumulative in the year and cumulative in 12 months – since November 2020." analyzes Brandão.

About the survey

The Producer Price Index - IPP, whose scope are the mining and manufacturing industries, aims at measuring the average change of sale prices received by the domestic producers of goods and services, as well as its evolution over time, signaling the short-term inflationary trends in Brazil. It is a key indicator for the macroeconomic follow up and, consequently, a valuable analytical instrument to decision takers, either public or private.

The IPP investigates the prices received by producers, free of taxes and freight, and defined according to the most usual trade practices in slightly more than 2,100 enterprises Nearly 6 thousand prices are collected monthly. Adopting the National Classification of Economic Activities - CNAE 2.0, the IPP produces indicators for 24 activities of the mining and manufacturing industries, as well as it reorganizes these same data into major economic categories, such as capital goods, intermediate goods and consumer goods (durable and semi and non-durable).