IGP-M rises 1.83% in February and accumulates a high of 16.12% in 12 months

The IGP-M (General Market Price Index) recorded a variation of 1.83% in February and accumulated a high of 16.12% in 12 months, informed this Friday (25th) the FGV (Fundação Getulio Vargas).

The result was in line with the expectations of analysts consulted by the Bloomberg agency, who projected a variation of 1.86% in the month, and 16.16% in the period of one year.

In January, the index had accelerated again and recorded a rise of 1.82% compared to December. Despite the still high variation in February, the IGP-M has been falling in the 12-month period. It was at 16.91% until January.

According to FGV’s Ibre (Brazilian Institute of Economics), the February result reflects changes in the prices of major commodities, such as soybeans, corn, and diesel.

The application of the full variation of the IGP-M of the contracts linked to it is not mandatory. The index has become a standard for contracts as it is released a few days before the month ends, which allows homeowners to calculate the adjustment before the next period begins.

The variation accumulated until February will be used in the correction of contracts maturing in March. A tenant who pays R$2,500 in rent today will pay R$2,903 in April if the owner applies the full adjustment.

The residential leasing survey by Secovi-SP (housing union) indicates that, on average, property owners have not applied the IGP-M variation fully to contracts. In 12 months, the accumulated change in rental prices in the capital of São Paulo was 0.75%.

With the rise of the IGP-M from 2020, real estate companies began to propose that owners negotiate lower or equivalent adjustments to the IPCA (Broad Consumer Price Index), which is the official inflation.

The index variation in 12 months reached 37.04% in May last year. The high rise also took many tenants to court, especially in commercial leases.

One of the points under discussion by those who defend the replacement of the IGP-M in the indexation of lease contracts is the fact that the greatest weights in the composition of the index are unrelated to real estate or civil construction activities.

​In January, FGV launched a new indicator with the potential to replace the IGP-M or, at least, offer the market an index calculated from contract negotiations. It was named Ivar (Index of Variation of Residential Rents).

The new index evaluates data from four capitals in the country —São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre– and measures the evolution of prices negotiated in contracts between tenants and landlords, and not the values ​​of rental advertisements, as in other surveys. .

The IGP-M is a basket of price indices, comprising the CPI (Consumer Price Index), the IPA (Broad Producer Price Index) and the INCC (National Construction Cost Index).

Of the three, the greatest weight comes from the IPA, which measures the price variation in agricultural and wholesale production. It includes commodities and industrial goods, and is influenced by the dollar. It accounts for 60% of the IGP-M result.

In February, the IPA rose 2.36%, driven by the rise in soybeans, which became 8.91% more expensive, corn, which increased 7.92%, and diesel, which rose 5.53%. “The contribution of these three items accounted for 45% of the rate calculated by the IPA”, says André Braz, coordinator of the Ibre Price Index.

In the IPC, which accounts for 30% of the composition of the IGP-M and has a similar structure to the IPCA, the biggest increases came from the payment of IPVA and car licensing, with a variation of 3.83%.

In this indicator, the residential rent item registered an increase of 1.10%. The price of carrots also appears with an important weight in the CPI, which soared in February, and rose 57.42%.

The final slice of the IGP-M basket, the INCC, with 10% of the final result, closed February with a variation of 0.48%. The biggest increases were in service rates (5.66%), rental of machinery and equipment (2.31%) and in elevator prices (1.83%).