Food prices push Brazil’s November mid-month inflation up

Driven by higher food and airfare prices, mid-month inflation in Brazil rose 0.33 percent in November compared to October, well above market expectations of around 0.2 percent.

The variation in consumer prices measured by the IPCA-15 index, considered to be the most reliable inflation bellwether, stands at 4.84 percent in 12 months and 4.3 percent in the year – indicating that official inflation could end the year within the government’s target range.

Prices in the food and beverage sector rose 0.82 percent in the first fortnight of this month, having the most significant impact (0.17 percentage points) on the November result — household food rose 1.06 percent after five consecutive falls.

Seasonally, a rise in food prices is expected at the end of the year due to the arrival of summer, Brazil’s rainy season. Still, extreme weather events influenced by El Niño led to floods in the South and drought in the North, causing more damage than expected. Consequently, foods that are part of the Brazilian’s daily diet, such as onions, rice, potatoes, and fruits, saw prices rise in November.

Costs of products and services related to personal expenses (0.5 percent) and transportation (0.18 percent) also increased, impacting the IPCA-15 by 0.05 and 0.04 p.p., respectively. Within the transport group, the most critical item was air tickets, whose prices rose 19.03 percent in the first half of November.

In October, IPCA had already flagged a 23.7 percent increase in airfare. The end-of-year holiday period explains the increase in prices.Today’s data signals a change in how the Brazilian population has been experiencing inflation. Until October, poorer families experienced a relief in their budgets due to falling food prices, while richer families were feeling the pinch from higher health insurance premiums and air tickets.

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