Inflation weighs more on the low-income population

The rise in prices most affects the low-income population (with a household income of R$2,105.99) at the beginning of this year. According to the Institute of Applied Economic Research (Ipea), prices for this segment of the population increased by 1.44% in the first two months, 65% more than the increase for the high-income population, which has a monthly household income above R $21,059.92).

Maria Andreia Parente Lameiras, research technician at Ipea, points out that food at home was the main inflationary focus for the lower income classes in February. Items such as rice (3.7%), beans (5.7%), potatoes (6.8%), carrots (9.1%), eggs (2.4%) and milk (3.5%) registered expressive highs.

Transport also had an impact, with increases in urban bus fares (1.9%) and public transport through integration (9.4%).

For the middle and high income classes, the greatest inflationary pressure came from the education group, influenced by the increase in school fees (6.1%).

The scenario continued in March: the inflation preview, the IPCA-15, registered an increase of 0.91% for food and beverages. Items such as onions (16.64%) and silver bananas (12.33%) are among those that increased the most.

Inflation expectations for the coming months are decreasing

Expectations for inflation in the coming months are decreasing. Banks, brokers and consultancies project an increase of 3.75% in the IPCA for 2024, according to the BC’s Focus report. Four weeks ago, the signal was for a 3.8% increase in prices this year.

XP Investimentos revised its projection from 3.7% to 3.5%, pointing to the drop in grain prices as one of the relevant factors. They have reached lows recently. The broker points out that there is room for a further drop in corn prices.

Short-term expectations are favorable for the off-season. According to Bradesco, some consultancies have a bullish outlook for production. The planted area should be larger than expected, but still smaller than last year. The climate has also been more favorable.

The institution highlights that weather forecasts point to positive weather in the coming weeks, which could result in a smaller drop in productivity. The Mato Grosso Institute of Agricultural Economics (Imea) pointed out a significant increase in slaughters in the state: 36%.

The anticipation of Eletrobras’ resources should alleviate electricity prices. The government must use resources from company privatization to pay off debts related to the “water scarcity” and “covid account”.

The impacts could be greater. The federal government is interested in redistributing costs from the sector to customers in the free energy market, which would bring an additional drop in prices measured by the IPCA.

“La Niña” causes concerns for the second half of the year

One of the concerns regarding inflation for the second half of the year is the possibility of the “La Niña” climate phenomenon, characterized by the exceptional cooling of the waters of the Central Pacific Ocean.

The United States National Oceanic and Atmospheric Administration (NOAA) estimates that the chance of “La Niña” changing the rainfall pattern in the second half of the year is 62%. The weather phenomenon should take effect from August onwards.

According to Itaú BBA’s rural analysis team, “La Niña” could delay the return of rains, in addition to the risks of a reduction in volume from September onwards in important agricultural production areas. The reduction in rainfall, if confirmed, could affect summer crops in southern Brazil.