Itaú BBA - IPCA-15 rose 0.21% in April, slightly below expectations

Macro Brazil

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IPCA-15 rose 0.21% in April, slightly below expectations

abril 20, 2018

Our preliminary forecast for the headline IPCA in April points to a 0.30% increase

The mid-month consumer price index IPCA-15 rose 0.21% in April, somewhat below our estimate (0.24%) and the median of market expectations (0.25%). The index increased 0.10% in March and 0.21% in April 2017. Year-to-date inflation reached 1.08%, while the year-over-year change  remained stable at 2.80%. Healthcare and personal care (0.08 p.p.), food and beverages (0.04 p.p.), and housing (0.04 p.p.) provided the largest upward contributions during the month. Our preliminary forecast for the headline IPCA in April points to a 0.30% increase, pushing the year-over-year rate up to 2.84% from 2.68% in March. For the full year, our inflation estimate remains at 3.5%.

Market-set prices advanced 0.12% in April and the year-over-year change receded to 1.2% from 1.4% in March. Regulated prices climbed 0.50% during the month and the year-over-year change accelerated to 7.7% from 7.2% in the previous month. Among market-set prices, costs for food consumed at home fell 0.05% during the month as their year-over-year decline steepened to -4.4% from -4.0%; industrial prices went up 0.16% during the month and the year-over-year change quickened to 1.5% from 1.3% in  March; service prices rose 0.17% in April and the year-over-year rate slowed to 3.7% from 4.0%. The underlying indicator for service inflation – which excludes tourism items, household services, courses and communication – climbed 0.27% on a monthly basis and the year-over-year change slipped to 3.4% from 3.5% in the previous month.  

Breaking down by product groups, the largest upward contributions during the month came from healthcare and personal care (0.08 p.p.), food and beverages (0.04 p.p.), and housing (0.04 p.p.).  In the former group, the biggest upward contributions came from health insurance premiums (0.04 p.p.) and medication (0.02 p.p.). In the housing group, the biggest impact came from electricity tariffs (0.05 p.p.), reflecting mainly tariff adjustments by utility companies based in Rio de Janeiro. The biggest positive contributions in the food group came from fruits, meals consumed away from home,  milk and dairy. On the opposite end, the communication group posted a slightly negative change (-0.01 p.p.), following fare reductions for calls placed from landline phones to mobile numbers.

Core inflation measures increased vs. the previous month. The average of the three most used core measures (smoothed trimmed means, double weight core and core inflation by exclusion) rose 0.24% vs. 0.20% in  March, while the year-over-year change was stable at 3.2%. The diffusion index (which measures the share of products with positive price changes) narrowed to 49.9% from 55.1%. Seasonally-adjusted total diffusion dropped to 48% from 53%.

Based on the IPCA-15 report and other current information, our preliminary forecast for the headline IPCA in April is a 0.30% increase, with the year-over-year rate picking up to 2.84% from 2.68% in March. The biggest upward contributions will come from healthcare and personal care, and food items. For the full year, our inflation estimate remains at 3.5%.


 

Table 1 – IPCA-15

 

Elson Teles
Economist



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