Itaú BBA - IPCA rises 0.13% in May and year-over-year change reaches 4.66%

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IPCA rises 0.13% in May and year-over-year change reaches 4.66%

June 7, 2019

IPCA rises 0.13% in May reinforcing a benign inflation scenario

For the version with all charts and tables, please open the attached pdf file.
 

 The consumer price index IPCA rose 0.13% in May, printing below our estimate and the median of market expectations (both at 0.20%). Results for meals away from home, medication, fuel ethanol and clothing were the farthest from our forecast. 

 We revised our preliminary estimate for the IPCA in June to 0.02% from 0.04%. Our expectation implies deflation for food consumed at home, electricity and auto fuels. Electricity prices should decline due to the green mode in the tariff flag system applied to electricity bills, after yellow mode in May. Fuel prices tend to drop after price cuts at Petrobras refineries for both gasoline and diesel. We maintain our assessment that inflation dynamics remains quite benign, with core measures running at comfortable levels. 

 Incorporating the latest reading, the IPCA is up 4.66% yoy. Considering our estimates for the coming months, accumulated inflation should slow down to about 3.4% in June, in part due to low monthly inflation (we forecast 0.02%) and in part because the 1.26% hike in the IPCA in June 2018 will slip out of year-over-year calculations. Importantly, that result was deeply impacted by the truckers' stoppages in May 2018.

 Our forecasts for the IPCA remain at 3.6% for 2019 and 2020.

Julia P. Araujo
 

For the version with all charts and tables, please open the attached pdf file



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