Itaú BBA - IPCA year-over-year change slides to 3.37%

Macro Brazil

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IPCA year-over-year change slides to 3.37%

July 10, 2019

IPCA is virtually unchanged in June. Food, electricity and auto fuels posted a deflation during the month.

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

 The consumer price index IPCA rose slightly by 0.01% in June, printing somewhat above our estimate (-0.01%) and the median of market expectations (-0.03%).The difference related to our call was caused by milder deflation in costs for food consumed at home and higher prices for some industrial items, particularly personal care products. 

 Core inflation measures remain at comfortable levels. The underlying core services indicator, for instance, went up 0.2% in June, slowing down to 3.7% yoy from 3.9%. We thus maintain our assessment that inflation remains on a benign path due to substantial spare capacity in the Brazilian economy, favorable inertia and anchored expectations.

 We revised our preliminary estimate for the IPCA in July to 0.20% (0.23% previously). For the following months, our estimates are 0.05% in August and 0.16% in September. The IPCA climbed 0.71% in 2Q19 after rising 1.51% in 1Q19. In the first half, the index went up 2.23%. The year-over-year change decelerated to 3.37% from 4.66%. 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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