By Nelson Belen, Contributing Reporter
RIO DE JANEIRO, BRAZIL – According to data released Monday, October 30th, from the Getulio Vargas Foundation (FGV), the General Index of Market Prices (IGP-M), also referred to as the rent inflation index, declined in October, but officials expect this deflation to be short-lived with inflation projected to rebound in November.
The IGP-M is commonly used as a reference for the correction of contract values related to electricity and rental properties.
The latest FGV report indicated that October’s rent inflation was 0.20 percent, a decline from September’s inflation of 0.47 percent.
FGV attributed October’s deceleration to several indices which weigh heavily on the overall index, including price variations for iron ore and wholesale fuel.
In October, iron ore prices fell -8.28 percent from September’s +7.28 percent increase. Similarly, wholesale fuel prices in October declined -0.80 percent, compared with September’s rise of +7.09 percent.
However, FGV officials expect October’s rent deflation to be short-lived as these items rebound in November.
“Instead of falling, [in November] iron ore and fuel will become more stable,” explained FGV representative Salomão Quadros. “Moreover, wholesale food prices should continue to rise, which will slowly be transmitted to the retail market.”
Even with acceleration expected next month, the IGP-M is on track to decelerate this year for the first time since 2009. Since January, the accumulated IGP-M is -1.91 percent and in the last 12 months, -1.41 percent.
“The index would have to rise by almost one percent for the remaining two months of the year to get out of the negative territory,” said Quadros “And that is not what is being forecast.”
He added, “The cumulative twelve-month deflation should last until February or March.”
The IGP-M is composed of three indexes: the Wholesale Prices Index (IPA), the Consumer Price Index (IPC) and the Construction Cost National Index (INCC). They represent sixty percent, thirty percent and ten percent respectively of the IGP-M.