Itaú BBA - IPCA-15 climbed 0.38% in February, led by education and transportation costs

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IPCA-15 climbed 0.38% in February, led by education and transportation costs

February 23, 2018

Our preliminary forecast for the headline IPCA in February points to a 0.35% increase

The mid-month consumer price index IPCA-15 climbed 0.38% in February, in line with expectations. Year-over-year inflation decelerated to 2.86% from 3.02% in January. Education and transportation costs provided the largest upward contributions during the month (0.20 p.p. each). On the opposite side, housing (-0.08 p.p.) and apparel (-0.04 p.p.) posted negative contributions. Our preliminary forecast for the headline IPCA in February points to a 0.35% increase, maintaining the year-over-year rate at 2.9%. For the full year, our estimate for the IPCA remains at 3.5%.

The IPCA-15 result in February (0.38%) printed in line with our estimate (0.37%) and the median of market expectations (0.38%). The index rose 0.39% in the previous month and 0.54% in February 2017. The year-over-year change slid to 2.86% from 3.02% in January.

Market-set prices advanced 0.38% in February and the year-over-year change slowed down to 1.4% from 1.5% in January. Regulated prices climbed 0.37% during the month and the year-over-year change slid to 7.4% from 7.8%. Among market-set prices, costs for food consumed at home increased 0.13% during the month as their year-over-year decline eased to -3.9% from -4.5%; industrial prices went up 0.05% during the month and the year-over-year change receded to 1.1% from 1.3% in January; service prices soared 0.71% in February and the year-over-year rate decelerated to 4.1% from 4.4%. About ¾ of the increase in service costs was caused by the yearly adjustment in monthly school tuition fees. The underlying indicator for service inflation – which excludes tourism items, household services, courses and communication – advanced 0.25% in February and the year-over-year change slipped to 3.4% from 3.6% in the previous month. 

Breaking down by product groups, the largest upward contributions during the month came from transportation (0.20 p.p.) and education (0.20 p.p.). In the transportation group, auto fuels (0.11 p.p.) and public transportation fares (0.06 p.p.) provided the largest upward contributions, led by gasoline, ethanol and urban bus fares. In the education group, the biggest impact was caused by the yearly adjustment in monthly school tuition fees. Tuitions for regular courses increased 5.2% (impact of 0.16 p.p.), while tuitions for diverse courses went up 3.5% (impact of 0.03 p.p.). On the opposite direction, housing (-0.08 p.p.) and apparel (-0.04 p.p.) posted negative contributions. In the housing group, the decline in electricity bills (impact of -0.11 p.p.) stood out, still reflecting the (residual) effect of the green mode in the tariff flag system, activated in early January, following red mode level 1 in December. In the apparel group, the negative reading was produced by discounts that are usually offered at this time of the year.

Core inflation measures receded vs. the previous month and remain well-behaved. The average of the three most used core measures (smoothed trimmed means, double weight core and core inflation by exclusion) reached 0.25% vs. 0.31% in January, while the year-over-year change slipped to 3.3% from 3.6%. The diffusion index (which measures the share of products with positive price changes) narrowed to 51.2% in February from 61.9% in January. Seasonally-adjusted total diffusion fell to 48% from 56%.

Based on the IPCA-15 report and other current information, our preliminary forecast for the headline IPCA in February is a 0.35% increase. As in the IPCA-15, the biggest upward contributions will come from education and transportation costs. On the other hand, food and apparel are set to post negative changes. For the full year, our estimate for the IPCA remains around 3.5%.

Table 1 – IPCA-15

 

Elson Teles
Economist



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