IGP-M: rent inflation falls more than expected – 06/29/2023 – Market

The IGP-M (General Market Price Index), known as “rent inflation”, fell more than expected in June and marked the most accentuated deflation rates in the historical series both in the monthly comparison and in the accumulated result of the last year .

The IGP-M recorded a drop of 1.93% in June, after a drop of 1.84% in the previous month, informed the FGV (Fundação Getulio Vargas) this Thursday (29). With this result, the index began to show a drop of 6.86% in 12 months, marking record deflations in the series started in 1989.

The expectation in a Reuters poll of analysts was a 1.70% indentation in June compared to May.

According to André Braz, coordinator of price indices, this month’s IGP-M reading was the result of the drop in fuel prices at refineries, with diesel falling 13.82% and gasoline falling 11.69%.

“Apart from this contribution, the prices of important agricultural commodities continue to fall, such as: corn (-14.85%) and cattle (-6.55%)”, he added.

Thus, the IPA (Extended Producer Price Index), which accounts for 60% of the general index and determines the variation in wholesale prices, fell 2.73% in June, compared to a drop of 2.72% in May.

The CPI (Consumer Price Index), which has a weight of 30% in the overall index, began to retreat by 0.25% in the month, leaving behind the high of 0.48% in May.

On the consumer side, the main contributions came from gasoline prices (-3.00%) and new cars (-3.76%), explained Braz.

The INCC (National Construction Cost Index), in turn, rose 0.85% in June, compared to 0.40% in May.

Inflation in Brazil has shown signs of cooling, according to recent data, which has raised the prospect that the Central Bank will soon start cutting the Selic interest rate, currently at 13.75%.

The IGP-M calculates producer, consumer and civil construction prices between the 21st of the previous month and the 20th of the reference month.

Producer prices have record drop in May and low in 12 months is the highest in the series

Producer prices in Brazil retreated for the fourth consecutive month in May and at the most intense pace ever recorded, with the 12-month deflation reaching a record since the beginning of the historical series, in 2014.

The IPP (Producer Price Index) fell 3.07% in May compared to the previous month, informed the IBGE (Brazilian Institute of Geography and Statistics) this Thursday.

In April, the IPP had retreated 0.35%, and the May reading marked the strongest drop in the series, surpassing the 3.04% retreat seen in August 2022.

The result led the index accumulated in 12 months to drop 9.20%, also marking the biggest retraction of the historical series for this indicator.

Among the 24 activities analyzed, the IBGE pointed out that 20 had negative price variations. The industrial activities responsible for the greatest influence were petroleum refining and biofuels (-1.16 pp), other chemical products (-0.47 pp), mining and quarrying (-0.47 pp) and food (-0.42 pp). pp).

The most expressive variations came from petroleum refining and biofuels (-10.47%), extractive industries (-9.32%), other chemical products (-5.78%) and paper and cellulose (-5.51% ).

“In the last five months, we have seen a growing appreciation of the real against the dollar. This causes a decrease in prices in the Brazilian currency, one of the reasons that explain the greater number of activities with price reductions. The export sectors, naturally , are the most affected”, explained Alexandre Brandão, an IBGE analyst.

The IBGE highlighted that the oil retinol and biofuels sector recorded the sixth consecutive negative result and the highest since April 2020 (-20.61%), under the weight of the decline in the price of diesel oil, the product with the greatest weight in the activity. .

“There is a direct connection between the drop in the price of crude oil, observed not only in Brazil but worldwide, and refining products. The current greater supply of oil causes a price reduction”, completed Brandão.

The IPP measures the variation in product prices at the “factory gate”, that is, excluding taxes and freight, for 24 extractive and transformation industries.