July deflation conceals soaring services prices

Tourism packages were up by 2.70 percent in July alone. Photo: Vinicius Bacarin/Shutterstock

Brazil’s consumer prices were down by 0.68 percent last month — the first monthly deflation in over two years and the lowest result for any month since 1980.

Efforts from the government to bring down energy prices on the one hand — and from the Central Bank to control inflation through aggressive monetary tightening on the other — appear to have borne fruit, with prices falling in the transport and housing categories and bringing down overall inflation.

However, the July deflation conceals rising prices in other segments — for example in the services sector. Per the Brazilian Institute of Geography and Statistics (IBGE), the price of services grew 0.8 percent in July, bringing 12-month inflation in the sector to 8.87 percent.

This is somewhat below overall annual inflation, which stood at 10.07 percent — but while overall inflation has slowed this year, with forecasts for year-end inflation falling, inflation in the services sector has only accelerated since the start of the year.

Airline tickets and vehicle hire saw the most impressive price leap last month, with 8.02 percent and 13.39 percent increases, respectively. Tourism packages (2.70 percent), nightlife establishments (2.62 percent), accommodation services (2.44 percent), and moving services (2.23 percent) also saw marked increases.

Food prices also continued to increase last month, with 1.30-percent inflation in the food and beverages category.