Inflation: IPCA-15 rises 0.69% in June – 06/24/2022 – Market

With the impact of the readjustment of health plans, inflation measured by the IPCA-15 (National Index of Extended Consumer Prices 15) rose 0.69% in June, informed this Friday (24) the IBGE (Brazilian Institute of Geography and Statistics).

The high represents an acceleration compared to May, when the indicator had advanced 0.59%. The new result came in slightly above financial market estimates. Analysts consulted by the Bloomberg agency projected a variation of 0.68%.

With the entry of data for June, the IPCA-15 started to accumulate a high of 12.04% in 12 months. In this cut, the increase until May had been more intense, of 12.20%.

Despite registering deceleration in the accumulated, the previous indicator of inflation completed the tenth month above 10%. In other words, the IPCA-15 has been in double digits since September last year.

In the view of analysts, the June data reinforce the signs that inflation has left its 12-month peak behind. This, however, does not remove the concern with the price scenario in Brazil.

“In general qualitative terms, the reading remained quite unfavorable, although some core measures that weigh more heavily on industrial goods saw very little relief”, points out economist Daniel Karp, from Banco Santander.

The official inflation index in Brazil is the IPCA (Broad Consumer Price Index), also released by the IBGE.

As the IPCA variation is calculated over the reference month, the data for June is not yet complete. It will be known on the 8th of July.

The IPCA-15, as it is released earlier, signals a price trend. The prior indicator is usually calculated between the second half of the previous month and the first half of the reference month of the disclosure.

In this case, prices were collected between May 14 and June 13. This means that the new result still does not capture the reflexes of the readjustment of gasoline and diesel oil announced by Petrobras on June 17th.

All groups have discharges in the month

The nine groups of products and services surveyed had price hikes this month, according to the IPCA-15.

Among the segments, the biggest impact (0.19 percentage points) came from transport (0.84%), even with the deceleration compared to May (1.80%).

This loss of pace was caused by the drop in fuel prices (-0.55%), which had risen 2.05% last month. Diesel (2.83%) even advanced again, but ethanol and gasoline fell by 4.41% and 0.27%, respectively.

Within transportation, there were increases in airline tickets (11.36%), voluntary vehicle insurance (4.20%) and license plates (1.71%).

In June, clothing (1.77%) showed the greatest change in prices among the groups surveyed. The sector had an impact of 0.08 percentage point on the IPCA-15.

The IBGE also highlighted the behavior of health and personal care. The group advanced 1.27%. As a result, it contributed 0.16 percentage points to the index. It was the second largest of the month, behind transport.

The health and personal care segment was boosted by health plans, which rose 2.99% and accounted for 0.10 percentage point in the IPCA-15. It was the greatest influence among the sub-items surveyed.

When explaining the high, the IBGE mentioned that the health plans had an adjustment of up to 15.50% authorized by the ANS (National Supplementary Health Agency) on May 26.

The food and beverage group, in turn, rose 0.25% in June, after rising 1.52% in May. The biggest influence for this deceleration came from food for consumption at home.

Long-life milk, which had risen 7.99% in May, recorded a high of 3.45% in June. There were drops in the prices of carrots (-27.52%), tomatoes (-12.76%), potatoes (-8.75%), vegetables (-5.44%) and fruits (-2.61%).

These foods had skyrocketed at the start of the year with the effects of drought in the South and heavy rains in regions such as the Southeast and Northeast.

“The picture is still quite complicated”, evaluates Stephan Kautz, chief economist at EQI Asset, who draws attention to the acceleration in service prices.

He points out that the BC (Central Bank) should raise the basic interest rate again to try to contain inflation.

The next meeting of the Copom (Monetary Policy Committee) is scheduled for August. In its most recent meeting, on June 15, the collegiate raised the Selic to 13.25% per year.

What explains the scarcity in the pandemic

In the 12-month period, the IPCA-15 is well above the inflation target pursued by the BC for the IPCA. In 2022, the center of the benchmark measure is 3.50%. The ceiling is 5%.

Financial market analysts project a new target burst in 2022, the second consecutive year of noncompliance.

Over the course of the pandemic, inflation has gained momentum due to a combination of factors.

Scarcity of inputs, high production costs of various goods, negative effects of the climate on energy and food and impacts of political turmoil on the exchange rate are part of this list in Brazil.

In 2022, an additional component began to pressure part of prices: the War in Ukraine. With the conflict, oil and agricultural commodities rose in the international market.

The reflection in Brazil was the record of new highs in fuel and food prices during the first half of this year.

political impact

With the elections approaching, the escalation of inflation became a headache for President Jair Bolsonaro (PL).

The scarcity of items such as fuel is seen by members of Bolsonaro’s campaign as the main obstacle to reelection.

Under pressure, the president has piled up attacks against Petrobras in recent days. The reason was the new adjustment in gasoline and diesel oil announced by the state-owned company on June 17th.

The advance, which came into effect at the refineries the following day, should impact the IPCA at least in June and July. For now, economists project that the official inflation index will close the year around 9% in the accumulated.

In an attempt to curb the famine, Bolsonaro on Thursday (23) sanctioned the law that sets a ceiling for ICMS (state tax) rates on fuel, energy, transport and telecommunications.

The president, however, vetoed a device that sought to guarantee the recomposition of funds for health and education in the event of damage to these areas due to loss of revenue.

Economist Claudia Moreno, from C6 Bank, assesses that the ICMS ceiling generates a downward bias for inflation projections in 2022. At the moment, the bank predicts an increase of 8.4%. However, the effects of the ceiling are not lasting and can cause negative consequences later on, says the analyst.

“Projects that increase tax exemptions without a fiscal counterpart put pressure on public accounts and may have the opposite effect in the future, that of putting pressure on inflation.”