IPCA-15, Brazil’s mid-month inflation index, suggests that overall consumer prices will continue to decrease in August.
The index, which is considered a reliable predictor of official inflation, showed a 0.73-percent dip this month, the biggest on record, pushing the 12-month rate below the 10 percent mark for the first time in a year.
But Brazil’s deflationary process is quite different from the recent inflationary crisis. While price surges were widespread for months, lowering costs are concentrated in a handful of segments — such as transportation and housing costs.
Both segments were heavily impacted by recent moves made by the government to cap energy taxes, which reduced fuel prices at the pump, and also made utilities more affordable. Additionally, oil and gas major Petrobras lowered fuel prices at refineries as international Brent rates fell.
Airfare tickets, which had been pressuring inflation up, also went down by 12.22 percent in August.
Yesterday, Roberto Campos Neto, chairman of the Brazilian Central Bank, said during an event in Chile that he expects consumer prices to fall for the next “two to three months.”
As we flagged in last week’s episode of the Explaining Brazil podcast, however, food prices have not eased. They became 1.12 percent more expensive in August, according to the IPCA-15 mid-month index — the price for a milk carton went up by 14.2 percent, on average.
With a standard grocery shop becoming increasingly unaffordable, consumers are turning to products close to their expiration dates or even to items such as “broken” beans, whey as a cheaper alternative to milk, and off-cuts of lunch meat.
As ultra-processed food is cheaper, it also tends to be favored by low-income shoppers. That aggravates the rising hunger and obesity rates in Brazil, as much of the population is not receiving adequate nourishment, either in quantity or quality.
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