Brazil's August inflation turns negative on lower energy, food costs

In August, Brazil’s inflation was -0.02%, a 0.4 percentage-point drop in relation to the month of July (which was 0.38%). This decline was influenced by a drop in Housing sector prices (-0.51%) — following a drop in the price of residential electricity (-2.77%) — and of Food and beverages (-0.44%), which recorded its second consecutive drop (-0.73% for in-home meals).

Over the year, accumulated inflation stands at 2.85% and, over the past 12 months at 4.4%, according to Extended National Consumer Price Index (IPCA) data released this Tuesday, September 10, by the Brazilian Institute of Geography and Statistics (IBGE). This was the first negative rate recorded since June 2023, when the index dropped to 0.08%.

In the Food and beverages group, lower prices were observed for potatoes (-19.04%), tomatoes (-16.89%) and onions (-16.85%). For Meals outside the home (0.33%) the price drop was smaller than in the previous month (0.39%). For the sub-item snacks the decline was from 0.74% in July to 0.11% in August, whereas for meals the increase was from 0.24% to 0.44%. Prices rose notably for papaya (17.58%) chunky bananas (11.37%) and ground coffee (3.70%).

André Almeida, the survey manager, underscores that the change in the electricity tariff rates was the main factor behind the drop in the Housing category. “The main thrust came from residential electricity, the tariff rate for which reverted to the green rate in August with no surcharge on electricity bills, as had been charged at the yellow rate in July,” he pointed out.

The main contributing factor toward the drop in prices was greater availability of these products on the market as a consequence of a milder climate in the middle of the year, which was favorable for production of such food crops, and faster rates of harvesting” – André Almeida, IPCA survey manager at IBGE

“The main contributing factor toward the drop in prices was greater availability of these products on the market as a consequence of a milder climate in the middle of the year, which was favorable for production of such food crops, and faster rates of harvesting,” Almeida points out.

The IPCA encompasses families with earnings ranging from 1 to 40 minimum wages, resident in the metropolitan regions of Belém, Fortaleza, Recife, Salvador, Belo Horizonte, Vitória, Rio de Janeiro, São Paulo, Curitiba, Porto Alegre, and also the Distrito Federal and the municipalities of Goiânia, Campo Grande, Rio Branco, São Luís, and Aracaju.

TRANSPORT — As a group, Transport (0.00%) remained stable, to a great extent through price movements in opposite directions among its main sub-items. Fuels prices (0.61%), compressed natural gas (4.10%), gasoline (0.67%) and diesel (0.37%) increased, whereas the price of ethanol dropped 0.18%. Moreover, airfares prices declined (-4.93%).

“The decline of airfare prices in August can be explained by the opposite trend observed in July, the month of school vacations when demand for airfares increases in view of family holidays,” the research manager explains.

DROP IN THE INPC — The National Consumer Price Index (INPC) which encompasses families earning 1 to 5 minimum wages, declined by 0.14% in August to 0.40 percentage points below the rate observed in July (0.26%). Over the year, the INPC accumulated gains of 2.80% and, over the past 12 months, of 3.71%, and thus lower than the 4.06% observed in the previous 12 months. In August 2023, the rate was 0.20%.

Foodstuff prices fell 0.63% in August, the second consecutive decline following the 0.95% drop in July. For its part, the change in non-foodstuff prices declined 0.65% in July, to 0.02% in August.

In regional terms, Vitória saw the greatest increase (013%), owing to water supply and sewage collection rates (4.04%). The smallest change was observed in São Luís (-0.58%), due to a drop in prices of tomatoes (-23.78%) and residential electricity rates (-4.50%).