Economists see inflation still uncomfortable until elections

Even with the projection of a loss of rhythm, inflation should remain under pressure on the eve of the October elections, in a situation that is still uncomfortable for the pockets of Brazilians, according to economists.

According to them, the expectation is that the IPCA (Broad Consumer Price Index) rises from a high of 10.07% in 12 months until July – data released on Tuesday (9) by the IBGE (Brazilian Institute of Geography and Statistics)– for an advance close to 8% in the accumulated until September.

“The scenario is still uncomfortable for the population. It is a pressured inflation, far from the Central Bank’s target”, says economist Luca Mercadante, from Rio Bravo Investimentos. He projects IPCA of 8.32% in the accumulated until September.

The famine became a recurring theme of demonstrations by presidential candidates. To mitigate the loss of purchasing power of Brazilians, a factor that worries Jair Bolsonaro (PL) in his re-election bid, the government is betting on tax cuts and a boosted package of social benefits, including the expansion of Auxílio Brasil.

The ceiling for charging ICMS (state tax) on fuel and energy, sanctioned in June by Bolsonaro, has already had an impact on prices last month.

Products and services such as gasoline and electricity fell in the country, leading the IPCA to register a deflation (price drop) of 0.68% in July. This is the lowest rate in the historical series started in January 1980, according to the IBGE.

“The reduction in the inflation rate is good news for a government that needs to convert votes to win the elections. It is welcome”, says Creomar de Souza, founder of the political risk consultancy Dharma Politics.

“The point is that this decrease has manifested itself so far in segmented groups. We still don’t have such an abrupt drop in food, as we have seen in fuel”, he says. “It’s the government’s thorn in the side.”

The price reduction in July was more associated with fuel and did not affect items such as food, which impact the poor population’s pockets more.

Last month, the food and beverage group accelerated to 1.30%, the highest of the nine segments surveyed by the IBGE. While gasoline dropped 15.48%, long-life milk jumped 25.46%. The products were individual highlights in the period.

“July’s deflation came with the stroke of exemptions”, says João Beck, economist and partner at the investment firm BRA. “At some point this will have to be compensated for.”

According to economists, it is possible that the IPCA will register a new drop in August in the monthly variation, less intense than the 0.68% decline in July and still under the effect of the truce in fuels. For September, the expectation is that the index will show a positive rate again.

Sergio Vale, chief economist at MB Associados consultancy, forecasts accumulated IPCA of 8.4% until September. Despite the likely slowdown, he considers that the rate “is extremely high” compared to recent levels in the country.

“Among the poorest population, the element that can impact [o voto] is Aid Brazil. But the feeling is of still high inflation”, says Vale.

“The fall in the IPCA is like a Pyrrhic victory. There is a giant effort, with a giant tax waiver, and the effect can be temporary”, says André Perfeito, chief economist at Necton brokerage.

Perfect projects an inflation of 8.48% in 12 months until September. For him, even with the recent truce in agricultural commodities, food inflation should remain under pressure in the coming months due to factors such as high production costs.

The first round of elections is scheduled for October 2. An eventual second round was scheduled for October 30.

IPCA data up to September should be released in the middle of this period, on October 11, according to the IBGE calendar.

Professor Sérgio Praça, from the School of Social Sciences at FGV (Fundação Getulio Vargas), believes that the economic context tends to weigh on voters’ decisions. The balance for Bolsonaro is still uncertain, according to the researcher.

“Presidential elections, not only in Brazil, are very determined by the economic situation. The better the situation, the greater the chance of reelection of a president”, he says.

“Inflation plays against the re-election of President Bolsonaro. How much it will impact, it is not known. The Auxílio Brasil of R$ 600 is a measure aimed at having an electoral impact. complete.

Alex Agostini, chief economist at credit rating agency Austin Rating, predicts a truce for accumulated inflation in August and September. This, he ponders, does not eliminate the whole picture of pressures on goods and services.

“Let’s not fool ourselves with the data. Deflation in July had the impact of tax changes”, says Agostini, who projects IPCA of 7.8% in the 12-month period up to September.

“We will still have an inflation weighing on the consumer’s pocket”, he adds.