IPP
Inflation in industry decelerates to 1% in May due to dollar depreciation
June 29, 2021 09h00 AM | Last Updated: June 30, 2021 12h12 PM
Industrial prices rose 1% from April to May, a result less than the increase registered from March to April (2.19%), representing a slowdown in industrial price inflation. It is also the smallest price change in 2021. The cumulative index in the year reached 17.58% while the cumulative rate in the last 12 months was 35.86%. The data are from the Producer Price Index (IPP), released today (June 29) by the IBGE.
May's rate is the 22nd consecutive positive in the monthly comparison. The survey measures the change in products' "factory gate" prices, excluding taxes and freight, of 24 activities in the mining and quarrying and manufacturing industries. Of these, 16 had positive changes in May. The biggest influence on the index came from food, which accounted for 0.35 percentage points of the total, followed by basic metals (0.25 pp), petroleum refining and ethanol products (0.18 pp) and metal products (0.09 pp).
One of the reasons for the slowdown, according to the manager of the IPP, Manuel Souza Neto, was the depreciation of the dollar in May. The real appreciated over the dollar by 4.9%, which for the expert is a considerable percentage for a single month. “As a result, a number of products valued in dollars dropped in price,” he explains.
The increase in food in May was 1.48%. Thus, the sector registered an cumulative change of 8.96% in the year and 30.54% in 12 months. Prices in the activity in May 2021 were 30.54% higher than in May 2020. Mr. Souza Neto says that the result in food is influenced by prices in the foreign market and the drought that occurred in Brazil, which affected production of milk. Food also has the main impact on the annual index (7.57 percentage points out of 35.86%).
Another major increase in May was in basic metals (3.54%), the biggest change among all activities in the month. The high accumulated by the sector in the year is 31.85% and 49.89% in the last 12 months. Both are the biggest cumulative changes of the activity in the entire time series, started in 2014. “It resulted from the impact of the price of inputs, especially iron ore”, justifies the survey manager.
The four activities that most influenced the result of the month are petroleum refining and ethanol products (1.80%) and metal products (3.12%).
In relation to the major economic categories, the IPP registered a drop in May: of 0.36% in capital goods. Intermediate goods, on the other hand, rose 0.88%, while consumer goods rose 1.48%, with 1.13% in durable consumer goods and 1.54% in semi-durable and non-durable consumer goods.
More on the survey
The IPP, whose scope is mining and quarrying and manufacturing industries, aims at measuring the average change in sales prices received by domestic producers of goods and services, as well as its evolution over time, signaling short-term inflationary trends in the country. It is, therefore, an essential indicator for macroeconomic monitoring and, consequently, a valuable analytical tool for decision makers, either public or private ones.
The IPP investigates, in a little more than 2,100 enterprises, the prices received by the producer, exempt from taxes, tariffs and freight and defined according to the most usual commercial practices. About 6,000 prices are collected monthly. Adopting the National Classification of Economic Activities - CNAE 2.0, the IPP generates indicators for 24 activities in the mining, quarrying and manufacturing industries. Also, it reorganizes the same data into major economic categories, broken down into capital goods, intermediate goods and consumer goods (durable and semi-durable and non-durable).
