Itaú BBA - IPCA rises 0.22% in April, below expectations

Macro Brazil

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IPCA rises 0.22% in April, below expectations

mayo 10, 2018

Our preliminary estimate for the IPCA in May is a 0.35% increase

The consumer price index IPCA climbed 0.22% in April, below our estimate (0.30%) and the median of market expectations (0.28%). The index had risen 0.09% in the previous month and 0.14% in April 2017. The year-to-date increase of 0.92% is the lowest since the Real Plan was implemented. The year-over-year change accelerated to 2.76% from 2.68% in March.  Healthcare and personal care (0.11 p.p.) provided the largest upward contribution during the month, led by medication prices and health insurance premiums. The biggest deviation from our call (-0.05 p.p.) came from food consumed away from home, with a 0.22% decline after climbing 0.52% in March. Our preliminary estimate for the IPCA in May is a 0.35% increase, with the year-over-year rate picking up to 2.80%.

Market-set prices moved 0.09% in April and the year-over-year increase receded to 1.0% (1.3% yoy in March). Regulated prices climbed 0.60% during the month and the year-over-year change advanced to 8.4% (7.1% yoy in the previous month). Among regulated prices, medication, health insurance premiums and electricity tariffs provided the largest upward contributions. Among market-set prices, costs for food consumed at home went up 0.27% in April and the year-over-year slide sharpened to -4.7% (-4.3% yoy in March); industrial prices rose 0.06% during the month and the year-over-year change reached 1.3% (1.2% yoy in the previous month); service prices moved 0.03% in April and the year-over-year change slowed to 3.5% yoy (3.9% yoy in the previous month). Meanwhile, the underlying service inflation indicator – which excludes items related to tourism, household help, courses and communications – moved 0.05% in April and its year-over-year change slipped to 3.1% from 3.4%.

Breaking down by product groups, the largest upward contributions during the month came from healthcare and personal care (0.11 p.p.), led by medication prices and health insurance premiums, followed by apparel (0.04 p.p.), housing (0.03 p.p.), and food and beverages (0.02 p.p.). The items that gave the biggest upward contributions were medications (0.05 p.p.); milk and dairy (0.05 p.p.); health insurance (0.04 p.p.); electricity (0.03 p.p.); fruit (0.03 p.p.); and women’s clothing (0.03 p.p.). On the opposite end, the biggest downward contributions came from food consumed away from home (-0.02 p.p.); poultry and eggs (-0.02 p.p.); auto fuels (-0.01 p.p.); rent and fees (-0.01 p.p.); and meats (-0.01 p.p.).

Core inflation measures remain well behaved. The average of the three most used core measures (smoothed trimmed means, double weight core and core inflation by exclusion) rose 0.18% in April (0.19% in March), while the year-over-year rate slid to 3.0% from 3.1%. Meanwhile, the diffusion index (which measures the share of products with positive price changes) widened to 53.9% from 50.4% in March. Seasonally-adjusted total diffusion climbed to 52% from 49%.

Our preliminary estimate for the IPCA in May is a 0.35% advance that would push the year-over-year rate up to 2.80%. The biggest upward contribution will come from the housing group – due to the activation of the yellow mode in the tariff flag system for electricity and to tariff adjustments by some utility companies –, followed by food and healthcare. On the other hand, transportation is expected to post a negative rate, thanks to a shaper decline in ethanol fuel prices.

 

Table 1 – IPCA

 

Elson Teles
Economist



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