Reduction of R$ 0.20 in gasoline should pull inflation down, say economists

Petrobras announced last Tuesday (19) a readjustment in the price of gasoline for distributors. The average amount transferred went from R$4.06 to R$3.86, a reduction of R$0.20 per liter.

The drop of almost 5% in the price of fuel should have repercussions in the next readings of the Broad Consumer Price Index (IPCA), an indicator that measures the country’s official inflation, according to experts consulted by the CNN Brasil Business .

How much the impact will be, however, there is no consensus: while some estimate deflation at around 0.2 percentage points (pp) in the 2022 IPCA, bringing annualized inflation to the level of 7%, others no longer understand that the measure will have so much impact.

This is the case of the chief economist at Órama Investimentos, Alexandre Espírito Santo, who predicts that the reduction in the value of gasoline should alleviate August’s inflation by 0.1 point.

“The effect will be fully in the next month,” he told the report. “It’s not much, but given the current scenario of escalating inflation, it helps. For the year, we don’t see any impact.”

Órama’s estimate for the 2022 IPCA is 7.2%, while 2023 already sees a reduction to 5.4%.

It is worth remembering that, in a reading of last June, this year’s accumulated inflation is 5.49% — above the target ceiling of 5%. In the last 12 months, the indicator accumulates a high of 11.89%.

In another estimate, Greenbay Investimentos predicts that the reduction in the price of gasoline by R$ 0.20 should produce a drop of 0.15 to 0.20 percentage points in the next IPCA readings, which will have repercussions on the annual result.

“We will start to feel the impact at the end of July, but it will be mainly in August. The division we make is that July will reflect 30% of the fall and, August, 70%”, says Flávio Serrano, head of macroeconomic analysis at the consultancy.

As a result, the reading for this month, according to Greenbay’s expectations, is deflation between 0.6% and 0.7%. The IPCA for August is in line with the estimate by Órama Investimentos, with a forecast of a fall of 0.1%.

In the year, on the other hand, there is a decrease of 0.2 pp. Previously predicted at 7.2% by Greenbay, the expectation is that it will fall to 7%.

“This is because the reduction in the price of gasoline to distributors follows other measures that are already underway. The ICMS ceiling set at 17% or 18%, depending on the state, already reflects a drop in fuels, and reduced federal PIS/Cofins taxes on gasoline as well”, said the expert.

Between the end of June and the beginning of July, all 26 states of the Union and the Federal District reduced the tax rate on the Circulation of Goods and Services to 17% or 18%.

Over the next three weeks, the average price of gasoline, according to data from the National Petroleum, Natural Gas, and Biofuels Agency (ANP) released last Friday (15), returned to the same levels as in September 2021. With a drop of 17.8%, they reached an average value of R$ 6.07 at the pumps.

Following in the wake of the reduction of the ICMS ceiling, last Tuesday’s adjustment to distributors also impacts what is seen at gas stations. According to Serrano, about 2.5% and 3% of the value will be deducted from the bombs as of this Wednesday.

André Braz, coordinator of the Getúlio Vargas Foundation Price Index (FGV), also makes this projection: for him, the pumps will present an average drop of 2% after the readjustment.

In his view, in line with that of other experts consulted, August should have inflation reduced by 0.1 percentage point. In July, the drop should be approximately 0.05 pp

“Expenditure on fuel weighs on average 6.5% of the family budget, and each 1% drop has an impact of -0.07 percentage point on the IPCA. The reduction does not all go to the consumer, it goes to less than half. At the pump it is 2%. The total influence is 0.14 percentage point on the IPCA, divided into these two periods”, explains Braz to the newsroom of CNN in Rio de Janeiro.

There are those who estimate a greater drop, especially in the annual reading. For Renascença Investimentos, the reduction of R$ 0.20 in the value of gasoline could reduce the IPCA for 2022 to 6.6%, compared to a projection of 6.9%.

In the short term, the house’s inflation strategist, Andrea Angelo, predicts that July will already have an impact on the readjustment, also because of the measures taken at the end of June.

“The impacts of the reduction of the ICMS ceiling and the zeroing of PIS/Cofins came very quickly into effect on the pumps, contrary to what, historically, has a slower transfer”, she said.

For July, Renascença expects the IPCA to fall by 0.71%, and, for August, down 0.20%.

Ativa Investimentos follows this line. For the year, the forecast is that inflation will be at 6.9% because of the succession of measures. August may see a reduction of 0.17 pp, according to specialist Étore Sanchez, going from 0.22% to 0.05%.

– Stéfano Salles, from CNN in Rio de Janeiro, contributed to this report.

*Under the supervision of Juliana Colombo.