Lowest inflation rate in more than 40 years

Inflation dropped -0.68% in July, the lowest rate in more than 40 years - since 1980. Deflation was mainly due to the drop in fuel and electricity prices, which lowered costs of transportation and housing. Prices of clothing and healthcare have also decreased.

Inflation has been decelerating since April this year, but July’s deflation, although expected, went beyond market expectations. In the year, the accumulated inflation is 4.77% and, in the last 12 months, 10.07%.

Gasoline prices dropped 15.48%; ethanol, 11.38%; vehicular gas, 5.67%. In July, gas and oil company Petrobras reduced the average price of fuel to distributors by 20 cents. By the end of June, there had already been lowering of taxes on fuel, electricity and communications.

As a result, prices went down 4.51% in transports, but also in utility bills (-1.05%), due to decreased costs in the energy sector (-5.78%). Besides the lower taxes on electricity services, the Extraordinary Tariff Revisions of ten distributors led to a reduction in tariffs too.

The sharp drop in the price of cotton also led to lower costs in clothing (0.58%). Health and personal care also showed a pace of deceleration (0.49%) due to the lower variation in the values of health plans (1.13%), and a drop of 0.23% in cost of personal hygiene items.