Understand what caused the highest inflation for October since 2002

The country’s official inflation once again surprised financial market analysts, with a higher-than-expected increase in October. Last month, the IPCA (Broad National Consumer Price Index) rose 1.25%, the biggest change for the period since 2002.

The result was released this Wednesday (10) by the IBGE (Brazilian Institute of Geography and Statistics). Market analysts consulted by Bloomberg agency projected a 1.06% change.

Gasoline was the main responsible for pushing up October inflation.

Fuel rose 3.10% and thus accounted for the greatest individual impact on the month’s index: 0.19 percentage point.

Gasoline has been pressured by the recovery of oil in the international market and by the high dollar. Both factors are taken into account by Petrobras when setting fuel prices at its refineries.

According to the IBGE, gasoline accumulates skyrocketing 38.29% in the year and 42.72% in the last 12 months.

The second biggest individual impact on the October IPCA came from airline tickets: 0.15 percentage points. The item rose 33.86% last month.

According to the institute, the increase in tickets reflects a combination of factors. Traditionally, prices tend to rise in October, with the greatest demand for travel.

This year, the advance of aviation kerosene causes additional pressure on the costs of airlines, which are trying to resume positive results after the collapse of Covid-19.

To complete the revenue from increases, there is still a stronger demand for tickets after the restrictions caused by the pandemic.

The third individual impact on the October index came from tomatoes (0.07 percentage points). Prices rose 26.01%.

Adverse weather conditions have shaken the production of foods such as tomatoes in recent months.

In addition to the drought, Brazil went through intense cold waves in July, with the record of frosts. Crop losses and reduced supply pressure prices up.

The fourth biggest impact on the October IPCA came from electricity: 0.06 percentage points. Light rose 1.16% in the month.

The increase, despite being robust, was lower than that seen in September (6.47%).

This year, energy has become more expensive due to the water crisis. The scarcity of rain forced the activation of thermal plants, raising the costs of electricity generation.

The reflection is the most expensive light in Brazilian homes.

“In October, the water scarcity flag was maintained, which adds R$ 14.20 to the electricity bill for every 100 kWh consumed. There were also tariff adjustments in regions with a significant weight in the IPCA, such as Goiânia, São Paulo and Brasília” , pointed out Pedro Kislanov, manager of the IBGE survey.

With the result of October, the inflation accumulated by the IPCA remains above double digits, with a high of 10.67% in 12 months. It is the highest accumulated since January 2016 (10.71%).

Kislanov mentioned that the higher costs of companies with items such as fuel and electricity cause pressure along the production chain.

However, in 12 months, administered prices, such as gasoline and electricity, still show a stronger rise than free services, pondered the IBGE analyst.

In the accumulated result until October, the rise in monitored prices was 17.01%. Meanwhile, services inflation was 4.92%.

In October, the IPCA diffusion index rose from 65% to 67%. The indicator reflects the spread of price increases among products and services surveyed by the IBGE.

The diffusion index was last below 50% in May 2020 (43%). At the time, the context was different, with oil prices at a lower level, recalled Kislanov.