IPCA-15 is the highest for February since 2016 and goes to 10.76% in 12 months

Pressured by expenses with education, food and transport, inflation measured by the IPCA-15 (National Index of Consumer Prices 15) rose 0.99% in February, informed this Wednesday (23) the IBGE (Brazilian Institute of Geography and Statistics).

This is the biggest change for the month since 2016 (1.42%). The result signals an acceleration compared to January. Last month, the high had been 0.58%.

The February rate was above financial market expectations. Analysts consulted by the Bloomberg agency had expected an increase of 0.87%.

With the entry of the new data, the IPCA-15 accumulated a high of 10.76% in the 12 months through February. The market expectation was for an advance of 10.63%. The accumulated was at 10.20% until January.

“It’s a scenario that remains bad, with persistent and more widespread inflation. The picture should continue like this at least in the first quarter of the year”, says economist Luca Mercadante, from Rio Bravo Investimentos.

“We have an inflation that continues under pressure at the margin. We still don’t see signs of a truce”, says economist Júlia Passabom, from Itaú Unibanco.

Education advances 5.64%

According to the IBGE, eight of the nine groups of products and services surveyed in the IPCA-15 had price increases in February. The biggest change (5.64%) and the biggest impact (0.32 percentage point) came from the education segment.

Regular courses rose 6.69% with the adjustments usually practiced at the beginning of the school year, indicated the IBGE. It was the largest contribution within education (0.28 percentage point).

The biggest changes in courses came from elementary school (8.03%), preschool (7.55%), high school (7.46%), day care (6.47%) and higher education ( 5.90%). Technical courses and graduate courses rose 4.40% and 2.93%, respectively.

Following education, comes the food and beverage group, which increased 1.20%, with an impact of 0.25 percentage point on the IPCA-15. The segment accelerated in comparison with the previous month (0.97%).

The household food subgroup changed from 1.03% in January to 1.49% in February. The major impacts came from carrots (49.31%), potatoes (20.15%), ground coffee (2.71%), fruit (1.75%) and meats (1.11%). On the other hand, there was a drop in the prices of whole chicken (-1.97%), rice (-1.60%) and chicken pieces (-1.31%).

After education and food and beverages, the transport group was the third highlight in February. The segment rose 0.87%, contributing 0.19 percentage points, after falling 0.41% in January.

In transport, the prices of own vehicles advanced 2.01%. There were increases in new cars (2.64%), motorcycles (2.19%) and used cars (2.10%).

On the other hand, fuels, also within transport, registered stability in February (0%). While diesel oil (3.78%) and gasoline (0.15%) registered price increases, ethanol (-1.98%) and vehicle gas (-0.36%) fell.

The only one of the nine groups down in February was health and personal care. The decline was 0.02%.

The official inflation index in Brazil is the IPCA (National Broad Consumer Price Index), also produced by the IBGE.

As the IPCA variation is calculated over the reference month, the data for February is not yet complete. It will be known on March 11.

The IPCA-15, as it is released earlier, signals a price trend. The prior indicator is usually calculated between the second half of the previous month and the first half of the reference month of the disclosure, which in this case are January and February, respectively.

In 12 months, the IPCA-15 is well above the inflation target pursued by the BC (Central Bank) for the IPCA. The center of the reference measure is 3.50% in 2022. The ceiling was set at 5%.

Market analysts project a new burst of the target in 2022, which would mean the second consecutive year of noncompliance. According to the median of projections from the Focus bulletin, the expected rise for the IPCA until December this year is 5.56%.

According to Júlia Passabom, from Itaú Unibanco, the loss of breath of the indicator should only occur with greater force from May onwards, due to factors such as the possible end of the water scarcity flag, which has made electricity bills more expensive in recent months.

For now, even with the IPCA-15 surprise, Itaú Unibanco maintains its forecast of a 5.5% increase for the IPCA in 2022.

Rio Bravo Investimentos, in turn, continues to see an increase of 5.4% in the official inflation indicator. However, there is a risk of the estimate being revised upwards, according to economist Luca Mercadante. “If it changes, it must be for the worse,” he says.

C6 Bank adopts a similar stance. “Our projection for 2022 inflation is 5.5%, with a high bias. The result of the IPCA-15 in February reinforces this bias”, indicated in a note the chief economist at C6 Bank, Felipe Salles.

In an attempt to curb inflation, the Central Bank has been raising the basic interest rate. The Selic reached 10.75% earlier this month.

The side effect of higher interest rates is to inhibit productive investments in the economy, as credit lines become more expensive in the country. The reduction of investments threatens the generation of jobs and the economic recovery.

shocks in the pandemic

According to analysts, persistent inflation reflects a combination of factors seen in the pandemic.

Throughout the crisis, there was an increase in administered prices, such as fuel and electricity, food shortages and disruptions in the global chain of industrial inputs.

In Brazil, inflationary pressure was intensified by the devaluation of the real. The dollar, which impacts items such as fuel, rose amid the political turmoil carried out by the Jair Bolsonaro (PL) government.

The general increase in prices mainly punishes the poorest, with less financial conditions to face the famine.

One of the threats to inflation control this year is the uncertainty of the electoral race, which usually impacts the exchange rate.

There is also fear of the possible consequences of adverse weather. The drought in the southern region, for example, can generate new advances in food prices.

Persistent inflation made it part of Brazilians to review their routine, with cuts in the daily consumption of goods and services, and postpone plans, such as courses and travel, throughout the pandemic.