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The price increase for the poorest Brazilian families was more than 10 times higher than the increase experienced by the richest people from January to September 2020.
In the first nine months of the year, inflation for the lowest-income families accumulated an increase of 2.5%. At the same time, the rate for the highest income class is 0.2%.
The data come from the indicator of the Institute of Applied Economic Research (Ipea) of inflation by income group, which in September registered an acceleration of prices in all the surveyed classes.
This indicator divides Brazilian families into six income groups and assesses how inflation affects each of these groups, month by month.
According to the survey classification, very low-income families are those with family incomes below R $ 1,650.50. And the families classified as high income are those whose family income is higher than R $ 16,509.66.
Most expensive market account
The explanation for this difference in the weight of inflation for rich and poor families lies mainly in the significant increase in food prices this year.
The Brazilian has seen several prices rise in the market in recent months; Although several foods have become more expensive, rice has gained prominence.
Economists note that there was an increase in demand for the product within the country, with people eating more at home and paying for emergency aid, while demand abroad warmed up, as some countries saw part of the decline. chain. of food affected by weather conditions or the pandemic itself.
Along with this, the strong devaluation of the real in recent months, which makes Brazilian products cheaper for those who buy in dollars, has further stimulated exports.
“We have a very devalued exchange rate and many of our products use imported inputs, such as bread flour. At the same time, it is very competitive to sell outside the country, and this generates product restrictions within the country that will obviously affect the price” explains economist Vivian Almeida, professor at Ibmec.
From January to September 2020, the increase in food at home is 9.2%. The Ipea bulletin highlights the impacts of the increases in rice (41%), beans (34%), milk (30%) and soybean oil (51%).
Budget weight
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From January to September, food delivery rose 9.2%. Rice rose 41% in that period and beans 34%
The increase in prices in the market is nothing new, but the important thing is that this increase is perceived by families in a different way, depending on the proportion of the budget that they allocate to the purchase of rice, beans and other foods.
“Inflation of the poorest is very pressured by the variation in food. When you look at the consumption basket of the poorest families, they consume less goods than the richest families, so food ends up gaining more weight ”, explains the economist. Maria Andreia Lameiras, head of the IPEA inflation indicator by income range.
According to her, the poorest spend almost 30% of the family budget on food at home. At the same time, the richest families spend a smaller part, around 10%, of their income on food at home.
With a larger budget, some of the wealthier families’ money goes to expenses that the poorest families don’t even have access to, like health insurance, car insurance, and school fees.
From January to September, the so-called free services registered a deflation of 0.05%. There were drops of 55% in airline tickets, 9% in accommodation prices and 1.7% in childcare fees.
The Ipea report points out that this deceleration in the prices of services provides greater relief to the higher income segment, which used to spend a part of its budget on these items.
Some families with bigger budgets even managed to save in 2020, by eliminating or reducing spending on food outside the home or buying goods such as clothing, as Vivian Almeida points out. “It is not strange to see who earns the highest salaries saying that the ability to save has increased.”
In practice, this change in habits caused by the coronavirus pandemic also ends up affecting (albeit temporarily) the so-called consumption basket of each income bracket. For example: a family that used to make two trips a year may not have traveled this year.
The result is that the proportions commonly used to define the consumption basket of each group may not accurately represent habits during the pandemic. Most families (from different income groups) are likely to eat more meals at home, for example.
“Probably the poorest family of which we say that they spend 30% on food may be spending more. And the richest, that we believe that they spend 10%, are probably also spending more, because they exchanged food outside the home for food at home, “says Lameiras.
The economist points out that it is not possible to quantify this change without field research, but he emphasizes that the difference between the poorest and the richest families remains.
“Everyone changed their consumption habits during the pandemic, but the difference will always continue because the poorest will always consume a greater portion of their income in food than the richest,” explains Lameiras.
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Among the price drops for services are airline tickets, with a reduction of 55% in the year to September.
Small difference in 2021
And what to expect in the next few months?
Lameiras says that the rise in food prices should continue in the coming months and, therefore, inflation for the poorest should not recede anytime soon.
“It may even slow the growth rate (from inflation to the poorest) a bit, but it will stay above the richest because we don’t see a relief in food prices until the end of the year.”
By 2021, the economist says she expects a reduction in the difference between inflation for the richest and the poorest.
“We hope that this disparity between food supply and demand improves. And, with the return of economic activity, we hope that services, which fell so much, will begin to show a reaction. So the idea is that we have less food pressure in 2021 and increasing “. higher service inflation. This will cause the gap (difference) between the poorest and the richest to begin to narrow. But for a long time we will have inflation of the poorest at the top. “
To try to contain the price increases, the government announced in September that it decided to reduce the import tax rate for paddy and processed rice to zero until December 31. In October, the government decided to reduce the import tax rate to zero also for soybeans and corn.
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