Itaú BBA - IPCA recedes to 3.22% in July

Macro Brazil

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IPCA recedes to 3.22% in July

agosto 8, 2019

IPCA recedes to 3.22% in July. Core measures at comfortable levels


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

• The consumer price index IPCA rose 0.19% in July, printing below our estimate (0.22%) and the median of market expectations (0.24%). Deflation in the sub-group comprised of personal care items was behind the difference vs. our call, with fragrance prices falling 3.3%. 

• Core inflation measures remain at comfortable levels. The core index for underlying services and industrial items (IPCA EX-3), for instance, posted 0.09% deflation in July, pushing its year-over-year change down to 2.6% from 2.9%. We thus maintain our assessment that the two major factors basing our forecast — a wide output gap and actual inflation (inertia and expectations) — continue to suggest comfortable inflation dynamics.

• We revised our preliminary estimate for the IPCA in August to 0.18% (0.20% previously). For the following months, our estimates are 0.00% in September and 0.23% in October. We assume that the tariff flag system for electricity bills will go back to yellow mode in September (impact of -0.16 p.p. that month).

• The IPCA is up by 2.42% year-to-date and its year-over-year increase slowed down to 3.22% from 3.37%. Our forecasts 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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