Summer inflation does not refresh Brazilians

Inflation should not bring much refreshment to Brazilian pockets this summer. Fruits and clothes used in the hottest season of the year, in addition to transport and accommodation services, consumed during the vacation period, rose well above the IPCA (National Index of Prices to the Extended Consumer).

In the 12 months up to November, the general price index accumulated an increase of 5.90% in the country, according to the IBGE (Brazilian Institute of Geography and Statistics).

From a list of 36 goods and services that make up the IPCA and that are associated with the summer, 32 registered higher inflation than the general indicator in the same period.

The biggest rise was that of fruits: 36.83%. According to economists, the prices of these foods advanced with the effect of the adverse weather in 2022, which reduced the supply of goods, and with production costs still high in the countryside.

“Climate is an important factor to explain the rise in fruit”, says economist Fabio Pesavento, professor at ESPM (Escola Superior de Propaganda e Marketing) in Porto Alegre.

For those thinking about traveling on vacation, flying has become more expensive. In 12 months until November, airfare accumulated a high of 35.02%, according to the IPCA.

Clothes come in the wake of the summer inflation ranking. The highlights are: dress (25.41%), men’s shirt or T-shirt (23.29%), skirt (21.07%) and men’s shorts or shorts (20.76%).

Hosting, on the other hand, rose 20.55% in the 12 months through November. Blouse (20.21%), ice cream consumed at home (19.16%) and children’s shorts or shorts (18.99%) appear next, among the ten products and services with the highest accumulated changes.

In Pesavento’s view, the data signal a combination of cost and demand pressures. In this sense, he points out that airline ticket prices were impacted by the increase in aviation fuel and the return of travel after the pandemic restrictions.

A similar movement occurred with clothes, according to the economist. The demand for clothing rose after the resumption of the movement of people, and textile inputs became more expensive in the pandemic. “The raw material went through the roof”, says the professor.

For those planning to travel, airfare and accommodation were not the only items that saw price increases.

The tourist package advanced 17.04% until November, according to the IPCA. Interstate buses and intercity buses accumulated increases of 16.85% and 7.75% in 12 months, respectively.

Snacks away from home increased by 10.65% and meals by 6.80%. Soft drinks and mineral water rose 7.16% outside the home, less than the same products for consumption at home (12.51%).

The beer for consumption at home, in turn, was high of 8.05%. The same drink away from home increased by 5.94%, closer to the IPCA (5.90%).

Those who avoid travel can also be pressured by the increase in products such as refrigerators (17.21%) and air conditioning (8.60%).

Due to the inflationary process in Brazil, the BC (Central Bank) raised the basic interest rate of the economy, the Selic. The measure seeks to cool the demand for goods and services and, consequently, contain prices.

This environment of prices, interest and household debt at high levels should make consumption difficult throughout the summer, predicts Mirella Hirakawa, senior economist at AZ Quest.

“Delinquency is high, we have a more emergency credit composition, this should somehow hold back consumption. It is an expected effect of a contractionary monetary policy [de corte de juros quando a economia já está fraca]. A slowdown in activity goes through credit. We are already seeing economic activity slow down.”

Fuels against the grain

From the list of 36 products and services consumed in the summer, only 2 accumulated a price drop in the 12 months up to November. Ethanol and gasoline fell by 27.98% and 25.50%, respectively.

Behind the truce, there was a reflection of the cut in fuel taxes on the eve of last year’s elections. The reduction of taxes on products took the IPCA down (5.90%) – gasoline has the highest individual weight in the calculation of the general index.

“Fuels were the main vectors that managed to bring a disinflationary dynamic in 2022”, says Hirakawa.

President Luiz Inácio Lula da Silva (PT) has already signed an MP (provisional measure) that extends the exemption on fuels in the country.

Initially, this tax relief was scheduled until the end of 2022. The new government’s decision seeks to avoid a significant increase in posts right at the beginning of the mandate.

With the MP, the exemption from federal PIS and Cofins taxes will be valid until the end of February for gasoline (which will also be exempt from Cide during the period), ethanol, aviation kerosene and vehicular natural gas – in addition to naphtha.

The cut will be valid until the end of the year for diesel, biodiesel and liquefied petroleum gas (LPG, cooking gas).