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A drop in gasoline has a slight impact on inflation, says FGV specialist

The drop of R$ 0.07 in the price of a liter of gasoline, which starts to take effect this Wednesday (15), should have a slight impact on inflation in December. Much lower than the expected increase in the values ​​practiced in the sale of beef, after the end of the Chinese health embargo on the product of Brazilian origin.

According to André Braz, coordinator of the Price Index at the Brazilian Institute of Economics, Fundação Getúlio Vargas (FGV/Ibre), the behavior of prices for the two types of products will be quite different.

Although Petrobras’ announcement is for a 3% drop in fuel prices, it should be reflected in a variation of only 1% at the pumps.

“The price of gasoline is also heavily influenced by anhydrous ethanol, which is present in 27% of the composition of the liter sold at service stations. It suffers from the high sugar cane, due to the droughts that affected the last harvest. It rained again in October, but the production cycle is long and, therefore, there is no forecast for refreshment”, says the economist.

Gasoline is a product for family consumption, unlike diesel. However, this fuel did not show a reduction in prices, which could have a stronger impact on the economy.

“The drop in the price of gasoline will only be a residual component, because it is a very low variation, and it will only be valid in the middle of the month, since prices were in effect in the previous table until December 14th. Diesel would be a little different, as it is used for freight freight and public transport. But it would also depend on the degree of reduction for the impact to be significant”, he ponders.

With regard to the embargo on Brazilian beef, which had lasted for four months, the expectation is that the resumption of exports will also pressure prices on the domestic market.

China is the main buyer of Brazilian merchandise and, without it, according to a survey by the Brazilian Association of Refrigerators (Abrafrigo), the volume of exports dropped 43% compared to the same period in 2020.

“There will certainly be a rise in the domestic market, interrupting a very small drop detected in recent weeks. The rise in beef should be one of the highlights of December’s inflation. We expect something between 0.75% and 0.80% for the month. It is a level lower than that of November (0.95% in the IPCA), but still high by the standards of December”, he concludes.

If the projection is confirmed, Brazil will end 2021 with official double-digit inflation, which has not happened since 2015 (10.67%). Before that, the previous occurrence had been in 2002 (12.53%).

Reference: CNN Brasil

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