Inflation has gained strength over the Covid-19 pandemic and changed consumption habits of part of the Brazilian population. The official index that measures the advance of prices in the country is the IPCA (Extended National Consumer Price Index).
In the 12-month period up to February, the indicator had high of 10.54%, according to the IBGE (Brazilian Institute of Geography and Statistics), responsible for the research. Next, understand what makes up the IPCA and how the index is calculated.
Purpose and composition
The IPCA’s intention is to show the variation of prices for the consumer of a wide basket of products and services month by month. Calculated by the IBGE since 1980, the IPCA captures inflation for families with an income of 1 to 40 times the minimum wage.
In total, 377 sub-items (products and services) are evaluated by the survey. The IBGE defines the composition of the IPCA based on the POF (Family Budget Survey), which indicates what families consume and the weight of each expenditure in the budget. The most recent POF data are from 2017 and 2018.
The products and services covered by the IPCA are divided into nine groups. These are: food and beverages, housing, household items, clothing, transport, health and personal care, personal expenses, education and communication.
The weights of each group are updated month by month, according to the price movement. According to February data, the transport segment is the one with the greatest impact on the calculation of the index: 21.75%.
This group covers products such as fuels, which skyrocketed in the pandemic. The second largest weight in the IPCA is food and beverages (20.83%). Housing appears next (16.08%).
Calculation of IPCA and personal inflation
To collect IPCA information, IBGE analyzes prices verified in 10 metropolitan regions of the country (Belém, Fortaleza, Recife, Salvador, Belo Horizonte, Vitória, Rio de Janeiro, São Paulo, Curitiba and Porto Alegre), in addition to BrasÃlia and the municipalities of Goiânia, Campo Grande, Rio Branco, São LuÃs and Aracaju.
The collection is done both in person and online. Even an automated calculation, through robots, is used when collecting values ​​for air tickets and transport by application, according to IBGE researcher Pedro Kislanov, IPCA manager.
To arrive at the general inflation index, the institute uses a weighted average of prices, taking into account monthly variations. Thus, families with different characteristics can feel the advance of goods and services in different ways, explains Kislanov.
“The IPCA covers 377 sub-items. A person who drives a car will feel the increase in gasoline more than a person who does not have a car, for example”, he says.
“A couple with children has certain expenses that a couple without children does not have. Each consumer has their own perception of inflation”, he adds.
What drives prices up
According to analysts, a combination of factors led the IPCA to the double-digit range in the 12-month period.
Throughout the pandemic, 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 government. (PL).
In the 12-month period, the transport group, influenced by sub-items such as gasoline, is the one with the highest price increase until February (18.26%). Then comes the housing group (14.61%).
Interest ratio
As it is considered the country’s official inflation index, the IPCA serves as a reference for the inflation target pursued by the BC.
In an attempt to contain the advance of prices, the monetary authority has been raising the basic interest rate in Brazil, the Selic, which reached 10.75% in early February. Despite this, inflation should end 2022 above the target, according to financial market projections.
This year, the center of the benchmark measure is 3.50%. The tolerance is 1.5 percentage points down or up, which means a ceiling of 5%. If the IPCA is above that, as predicted by the market, the country will have the second consecutive year of exceeding the target.
Differences from other indices
The IPCA differs from other IBGE indexes. Calculated by the institute since 1979, the INPC (National Consumer Price Index), for example, focuses on the inflation felt by Brazilians with lower incomes.
This indicator reflects the increase in prices for families with incomes between one and five times the minimum wage. Thus, it serves as a reference for correction of social benefits and the minimum wage.
The IPCA-15 (National Index of Consumer Prices Extended 15), also released by the IBGE, differs from the IPCA only in the period when the numbers are collected.
The IPCA variation is calculated over the reference month. Meanwhile, the IPCA-15 is calculated between the second half of the previous month and the first half of the reference month for the disclosure.
In other words, the IPCA-15 is known earlier than the IPCA. Hence, it signals a trend for prices.
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