FGV’s uncertainty indicator rises 0.3 point in October

The Brazilian Economy Uncertainty Indicator (IIE-Br) rose 0.3 point from September to October, to 112.0 points, informed the Getulio Vargas Foundation (FGV).

For the entity, the slight increase indicates stability, in the midst of the final stretch of the electoral campaign, which ended with the second round voting on Sunday (30).

The IIE-Br is made up of two components.

The first is the IIE-Br Expectation, constructed from the dispersion of forecasts for the exchange rate and for the IPCA, which dropped 5.8 points in October, to 105.8 points.

As a result, the component contributed negatively with 1.2 points to the aggregate variation of the IIE-Br in October.

The other component, the IIE-Br Mídia, maps the frequency of news with mention of uncertainty in the main newspapers.

On the other hand, the component rose 1.7 points in October compared to September, to 112.3 points, contributing positively with 1.5 points to the aggregate variation of the indicator.

“The Media component, with a weight of 80% in the indicator, retreated during the first half of the month, rising again in the second half of the month. This reversal reflected, mainly, the intensification of the presidential elections during the 2nd round, something that until then had little influence on the indicator”, says the note released by FGV.

According to the IIE-Br historical series, the mark of 110.0 points is considered the “comfortable level of uncertainty”. The score recorded in October was slightly above that mark.

“The convergence of the IIE-Br to levels below 110 points will depend on the cooling of the political scenario, on economic growth in the following months and on the economic policy to be adopted from January 2023 onwards”, says the FGV note.