Inflation accelerates to 0.86% in October, the largest increase of the month since 2002 | economy

This is the highest increase for the month since 2002, when the rate was 1.31%, and also the highest rate since December 2019, when it advanced 1.15%. In October 2019, the variation had been 0.10%.

Accumulated in 2020, the IPCA increased by 2.22% and, in 12 months, by 3.92%, above the 3.14% observed in the immediately previous 12 months. With the sharp acceleration, 12-month inflation is now only 0.08 percentage points below the center of the government’s inflation target for this year, which is 4%.

The result was slightly higher than expected. The median of the projections of 35 consulting firms and financial institutions consulted by Valor Data was 0.84%.

The food keeps pressing

The greatest variation (1.93%) and the greatest impact (0.39 percentage point) on inflation came, once again, from the food and beverages group.

Among the articles that posted the most, the highlights were food products such as rice (13.36%, after an increase of 17.98% in September), soybean oil (17.44%, after an increase of 27.54% in September) and meat (4.25%, after an increase of 4.53% in September).

The variation of items such as tomatoes (from 11.72% in September to 18.69% in October), fruits (from -1.59% to 2.59%) and potatoes (from -6.30%) accelerated. 17.01%). On the fall side, the highlights were the prices of onion (-12.57%), carrot (-6.36%) and garlic (-2.65%).

“What has been driving inflation for the last two months is mainly food. Some foods, in particular, have pressed so high, which are rice and soybean oil, but there is also meat. Usually, [essa alta] it is related to demand, to the influence of the high dollar on exports, ”said research manager Pedro Kislanov, also citing the contribution of emergency state aid to household income.

The second largest impact (0.24 percentage point) in the October IPCA came from transportation (1.19%), while the second largest change came from household items (1.53%), with an increase in 2.38%. , in the prices of electronic and computer products, influenced by the dollar.

See the result of each of the 9 groups surveyed

• Food and drink: 1.93%
• Housing: 0.36%
• Articles of residence: 1.53%
• Clothing: 1.11%
• Transport: 1.19%
• Health and personal care: 0.28%
• Personal expenses: 0.19%
• Education: -0.04%
• Communication: 0.21%

Price increases are widespread

Of the 9 product and service groups surveyed, 8 increased in October. The only fall was in the education group (-0.04%).

“We can say that price increases are more widespread among the components of the HICP,” Kislanov said, citing the IPCA diffusion index, which rose from 0.63% in September to 0.68% in October.

The diffusion index indicates the spread of high prices among the products surveyed by IBGE. In May, this indicator stood at 0.43% and since then it has maintained an upward trend.

I and services inflation increased from 0.17% in September to 0.55% in October, the largest change since February, when the indicator stood at 0.68%, which reinforces the reading of a more general increase in prices in the economy.

“It may be that we are in a moment of economic recovery, due to some indicators, such as that of the industry, which zeroed the losses from the pandemic. But, we are still in a very uncertain scenario, with the unemployment rate above 14%. So, we still have to wait ”, reflected the researcher.

Flights are up 39.83%

In the transportation group, the greatest variation came from air tickets (39.83%), which represented the individual impact on the index for the month (0.12 pp) and the greatest pressure factor in the acceleration of service inflation .

“The increase in airfare seems to be related to demand, since with the relaxation of social distance, some people have returned to use the service, which impacts the pricing policy of the airlines,” said Kislanov.

The second largest contribution of the group (0.04 pp) came from gasoline, whose prices rose 0.85%, slowing down from the 1.95% increase observed in the previous month. Another highlight was voluntary vehicle insurance, with an increase of 2.21%, after seven consecutive months of falls.

Inflation is high in all regions

The IPCA advanced, from September to October, in the 16 regions surveyed by IBGE. In only six of them, the advance was less than the national average. The highest increase was registered in Rio Branco (1.37%).

According to IBGE, inflation in the capital Acre was driven by food, especially meat (9.24%) and rice (15.44%). The lowest index was observed in the metropolitan region of Salvador (0.45%), which was influenced by the fall in gasoline prices (-2.32%).

Outlook and inflation target

Although the official inflation index remains under control in the country, the increase in the cost of living has weighed more in the pockets of the poorest. The FGV index that measures the variation in prices of products and services for families with incomes between one and 2.5 minimum wages, for example, accumulates an increase of 3.86% in the year and 4.54% in the last 12 months.

Despite the rebound in food in recent months, inflation expectations for this year are still below the central government’s goal of 4%, although above the floor of the target system, which is 2.5% in 2020.

Financial Institution Analysts project an IPCA of 3.02% in 2020, according to the latest Central Bank Focus survey.

Under the current rule, the HICP can range from 2.5% to 5.5% without formally breaching the target. The inflation target is set by the National Monetary Council (CMN). To achieve this, the Central Bank raises or lowers the economy’s basic interest rate (Selic), currently at 2% – a record low.

In recent months, with the rise in the dollar and the recovery of economic activity, prices have started to rise at a faster pace, especially in food.

In the minutes of the last Copom meeting, the Central Bank assessed that the pressure on inflation is “temporary” and expects a “reversal” in price increases. The BC, however, hardened the message about the possible space to cut the basic interest rate and highlighted being aware of the deterioration of the country’s fiscal framework and the implications of the increase in public debt for monetary policy.

The market continues to expect to maintain the basic interest rate at this level until the end of this year, rising to 2.75% by the end of 2021. In other words, the expectation is that the Selic rate will rise again next year.

By 2021, the financial market raised its inflation forecast from 3.10% to 3.11%. Next year, the central inflation target is 3.75% and it will be officially met if the index fluctuates from 2.25% to 5.25%.

October INPC rises 0.89%

The National Consumer Price Index (INPC), the reference index for salary adjustments and social security benefits, rose 0.89%, above the 0.87% registered in September. This is the highest one-month result in October since 2010, when the index was 0.92%.

In the year, the INPC accumulated an increase of 2.95% and, in the last 12 months, 4.77%, above the 3.89% registered in the immediately previous 12 months. In October 2019, the rate was 0.04%.