Itaú BBA - IPCA climbs 0.38% in January, below expectations

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IPCA climbs 0.38% in January, below expectations

February 8, 2017

Our preliminary estimate for the IPCA in February stands at 0.47%

The consumer price index IPCA rose 0.38% in January, below our estimate and the median of market expectations. Hence, the year-over-year change slid to 5.35% from 6.29% at the close of 2016. Transportation, food and beverages provided the largest upward contributions during the month. The apparel group posted a negative change. Food consumed at home and mobile phone service represented the biggest deviations from our expectation. Our preliminary estimate for the IPCA in February stands at 0.47% – driven by seasonal pressure from the education group –, pushing the year-over-year change down again, to 4.9%.

The IPCA increased 0.38% in January, below our call (0.43%) and the median of market expectations (0.42%). According to census bureau IBGE, it was the lowest reading for January since 1994, when the Real Plan was implemented. The index had risen 0.30% in December and 1.27% in January 2016. The year-over-year change in headline inflation slowed down to 5.35%, after ending 2016 at 6.29%.

Market-set prices advanced 0.25% in January and the year-over-year rate slipped to 5.6% (6.6% yoy in December). Regulated prices climbed 0.80% and the year-over-year change decelerated to 4.5% (5.5% yoy in the previous month). Urban bus fares, health insurance premiums and gasoline exerted most of the upward pressure on regulated prices. Among market-set prices, prices for food consumed at home rose 0.17% during the month and the year-over-year change receded to 6.5% (9.4% yoy in December); service prices increased 0.36% in January and 6.2% yoy (6.5% yoy in the previous month); industrial prices advanced 0.12% during the month and the year-over-year change slid to 4.3% (4.8% yoy in December). In the service segment, the underlying indicator – which excludes items related to tourism, household help, courses and communications – climbed 0.45% in January and the year-over-year change decelerated to 5.8% (6.3% yoy in the previous month).

Breaking down by product groups, the largest upward contributions came from transportation (0.14 p.p.), and food and beverages (0.09 p.p.). Public transportation provided a substantial contribution, due to adjustments in urban bus fares in several state capitals. Fuels also stood out in the transportation group. Food consumed away from home and oils and fats caused most of the impact on the food group. On the other hand, apparel provided a negative contribution (-0.02 p.p.), reflecting seasonal sales at this time of the year. There were price drops in other groups as well, reaching beans, potatoes and tomatoes (food), airfares (transportation) and electricity tariffs (housing).

Core inflation measures increased somewhat from the previous month. The average of the three most used core measures (smoothed trimmed means, double weight core and core inflation by exclusion) rose 0.40% in January (0.36% in December), while the year-over-year rate decelerated to 6.2% (6.7% yoy in the previous month).The diffusion index (which measures the share of products with positive price changes) widened to 63.3% from 59.8% in December. Seasonally-adjusted total diffusion fell slightly to 57% from 58%.

Our preliminary estimate for the IPCA in February stands at 0.47%, and will cause another decline in the year-over-year change to 4.9%. Education will provide the biggest upward contribution during the month, about half of estimated inflation, due the seasonal adjustment in school tuition fees.

Table 1 – IPCA


 

Elson Teles
Economist


 

 



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