FGV’s Consumer Price Index has the biggest drop in history in August

In August, the Consumer Price Index 10 (IPC-10) had the biggest drop in the historical series started in 1993, of 1.56%, according to data from the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre-FGV). The second biggest drop in the indicator was 0.59% in July 1998.

Similar to the IPCA, which measures official inflation measured by the IBGE, the IPC makes up the IGP-10 –which measures the variation in prices of products and services from the 11th of the previous month to the 10th of the current month–, and was the responsible for the 0.69% drop that the indicator had in August.

The IPC numbers still reflect the reduction of ICMS for electricity and gasoline.

“(The indicator) basically took every month of July, which started with the sharp drop in ICMS, and the first 10 days of August, which has already had three consecutive drops in refineries (two reductions in diesel and one in gasoline). Ethanol followed the same dynamics”, says Matheus Peçanha, researcher and economist at Ibre.

The economist refers both to the new floor approved by Congress for the state tax, and to the three price reduction announcements that Petrobras made in less than a month: two for diesel and the most recent for gasoline.

Gasoline was one of the main contributors to the August price movement, going from a 1.49% drop in July to a 16.88% drop.

“Fuel declines have not yet been fully seen at the pumps, and should still continue to impact gasoline prices in the short term, throughout August, with a new deflation of gasoline for the month of August, and in the wake, ethanol”, it says.

Peçanha also talks about expectations about the contribution of food to the general deceleration of prices. “(We hope) recovery in the production of some vegetables, and in the production of other foods whose production was lost in the summer”, he says.

Other highlights among the lows or decelerations of the IGP-10 were: airfare (from 6.99% to -28.95%), residential electricity tariff (from -1.45% to -4 14%), beef ( from 0.27% to -0.65%) and clothing (from 0.99% to 0.36%).

Overall, five of the eight IPC-10 expenditure classes registered lower rates of change: Transport (from -0.41% in July to -5 71% in August), Education, Reading and Recreation (from 1.52% in to -5 75%), Housing (from 0.07% to -0.52%), Food (from 1.48% to 0.99%) and Clothing (from 0.80% to 0.44%).