Inflation is highest for October since 2002 and rises to 10.67% in 12 months

Driven by gasoline and airline tickets, the country’s official inflation, measured by the IPCA (Broad National Consumer Price Index), regained strength and accelerated to 1.25% in October, above analysts’ projections.

The rate is the highest for the month since 2002, informed this Wednesday (10) the IBGE (Brazilian Institute of Geography and Statistics).

Market analysts consulted by Bloomberg agency projected a 1.06% change. In September, the rise in the IPCA had been 1.16%.

With the October result, inflation accumulated in 12 months remains above double digits, reaching 10.67%. This is the highest accumulated since January 2016 (10.71%).

The IPCA is far from the ceiling of the inflation target pursued by the BC (Central Bank) in 12 months. The ceiling is 5.25% in 2021. The center is 3.75%.

In October, all nine groups of products and services surveyed rose, with emphasis on transport. This segment had the biggest change (2.62%) and the main impact on the month’s index (0.55 percentage points).

The result of transport was influenced by fuels (3.21%). Petrobras’ pricing policy takes into account oil prices on the international market, which rose with the reopening of the global economy, and the behavior of the dollar, above R$ 5.

According to the IBGE, gasoline advanced 3.10% in October. Thus, it had the main individual impact (0.19 percentage point) on the month’s IPCA.

It was the sixth consecutive rise in prices for this fuel. Gasoline accumulates skyrocketing 42.72% in the last 12 months.

The prices of diesel oil (5.77%), ethanol (3.54%) and vehicle gas (0.84%) also rose in October.

Pedro Kislanov, manager of the IBGE survey, recalled that the increase in fuel prices ends up putting pressure on various items along the production chain. Freight values ​​for goods become more expensive, for example.

“This ends up affecting other components,” he said.

One of the reflections of high fuel prices appears in airline tickets. In October, the item rose 33.86%, accounting for the second largest individual impact on the IPCA (0.15 percentage points).

According to Kislanov, high tickets are common in October. But the elevation was boosted by additional impacts from the higher fuel (aircraft kerosene). The greater demand for travel, stimulated by vaccination against Covid-19, also weighed in.

“It is common for high [das passagens] in October. But there is also the exchange rate depreciation and the increase in fuel. This may have contributed. There was also an increase in demand,” he indicated.

Among the groups of products and services, the second largest contribution (0.24 pp) in October came from food and beverages. The segment had a high of 1.17%.

The IBGE survey includes 16 capitals and metropolitan regions. In 12 months, 12 cities have IPCA above 10%.

Curitiba (PR) is the one with the highest inflation: 13.48%. Belém (PA) has the lowest index (9.27%).

The rise in inflation in the country took shape throughout the pandemic. At first, there was a spike in food prices and then in fuel prices.

The rise of the dollar, lower inventories and advances in commodities help explain the behavior of prices.

Throughout 2021, the water crisis also began to threaten the control of inflation. The scarcity of rain forced the activation of thermal plants, raising the costs of generating electricity. The reflection is the most expensive light in Brazilian homes.

There is also the effect of the political crisis led by the Jair Bolsonaro government (no party), since the turmoil pushes the dollar up.

The tension in the financial market had a new chapter at the end of October, when the government decided to circumvent the spending ceiling to pay Auxílio Brasil.

This Wednesday, in an interview with a radio station in Espírito Santo, Bolsonaro again blamed “certain taxes” and restrictive measures adopted by states and municipalities to contain the spread of Covid-19 for high prices.

The president has pointed out the ICMS charged by states as the main responsible for the rise in fuel prices, although prices at refineries have been constantly readjusted upwards by Petrobras, a state-owned company controlled by the Union – and which he earlier called “monstrengo” , in a new criticism against the oil company.

The rise in prices is leading analysis houses to revise their projections for the IPCA for the year. Citi raised its forecasts from 9.5% to 10.4%, for example.

In an attempt to curb inflation, the Copom (BC Monetary Policy Committee) has been raising the basic interest rate, the Selic.

High prices, in an environment of higher interest rates, high unemployment and fragile income, make it difficult for families to consume and for business investments.

The financial market has been raising its projections for the IPCA. The median for the accumulated in 2021 is 9.33%, according to the most recent edition of the Focus bulletin, released on Monday (8) by BC.

It was the 31st week of high in the forecasts. Economists do not rule out new upward revisions.

with Reuters