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Inflation in industry stays at -0.66% in March

Section: Economic Statistics | Carmen Nery

April 28, 2023 09h00 AM | Last Updated: April 28, 2023 03h30 PM

#PraCegoVer A foto mostra uma refinaria de petróleo.
Sector of refining and biofuels exerts the biggest negative impact due to drop of foreign prices - Picture: André Motta de Souza/Ag. Petrobras

The industrial prices changed -0.66% in March over February. The cumulative index in the year hit -0.66%, the second lowest figure ever registered for March since the start of the time series in 2014.  The cumulative index in 12 months stayed at -2.32%.

Released today (28) by the IBGE, the Producer Price Index (IPP) data show that 12 out of 24 industrial activities investigated by the survey recorded negative changes in March in relation to February.


The four most intense changes were: petroleum refining and biofuels (-4.10%), pulp and paper (-2.42%), other chemicals (-1.41%) and leather products and footwear (1.28%). Petroleum refining and biofuels was the industrial sector that mostly highlighted in the composition of the aggregate result in the monthly comparison. This activity was responsible for -0.48 percentage points (p.p) of influence on the change in general industry (-0.66%).  Still in this issue, other activities that also highlighted were other chemicals, with -0.12 p.p. of influence, food (-0.11 p.p.) and pulp and paper (-0.08 p.p.). 

“Refining is the major highlight to influence the month´s result, yet it is also key to understand a lasting retreat movement in the industrial prices, which has been following the dynamics of commodities in the foreign market. The downward trend in the prices started in the second half of 2022 peaked in March with a cumulative index in 12 months of -2.32%. The IPP did not record a cumulative deflation in 12 months since September 2019 and the rate reported in March is the most intense in the entire time series,” highlights Felipe Câmara, the manager of the IPP. 

He says that a first factor to take into account in the analysis of the magnitude of this scenario is the “comparison basis”. Due to several reasons, the prices of imported inputs and commodities showed sharp rises during the pandemic, followed by a continuous and significant movement of reduction in the commodities, impacting “key” sectors and chains in the dissemination and establishment of prices in the domestic industry. For example, it is the case of the chain derived from petroleum or manufacture of food.  

“It helps to explain the deflation at the factory´s gate. The petroleum barrel is dropping since the second semester of 2022. It is worth highlighting that it is the major input of the refining industry. Fertilizers, which integrate the sector of other chemicals, are dropping as well. Since mid-2022, the foreign prices of fertilizers and naphtha have been dropping. This combination was very important to establish the prices in the chemical industry (the major responsible for the negative rate in 12 months). Although naphtha has recently “unstick” from the path of the petroleum barrel, reflecting in a rise in the petrochemical derivatives, this effect is still being offset by the drop in the prices of fertilizers,” analyzes Câmara. 

In the case of food, the reductions in the prices have been associated with the increase in the supply of highly-weighted products in this sector. In previous months, meat and milk led the reduction, while soybean derivatives pressed the producer prices downward in March. “The prices of grain, bran and oil are dropping and this reduction might be associated with the harvesting period of a significant harvest,” completes the IPP manager. 

Despite the positive result this month (due to the rise in the prices of iron ore), the cumulative index in 12 months in the mining and quarrying industries is -20.31%, the tenth consecutive negative figure in this perspective.

The reduction in the industrial inputs has been affecting the prices of goods for final consumption, which becomes clear when analyzing the behavior of the major economic categories. The manager of the IPP stresses that the movement of reduction in the prices, started in the second semester of 2022, is more significant in the category of intermediate goods, yet it has been somehow transmitted to other levels of the industrial chains. 

“Cumulative inflation in 12 months in the Overall Industry is at -2.32%, yet it is at -6.31% in intermediate goods. It is important to perceive that consumer goods have been continuously decelerating in this period. Today, this category is at 2.46% in 12 months, the lowest rate since 2019. We perceive that prices are being transmitted to the end of the chain,” highlights Câmara. 

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