RIO DE JANEIRO, BRAZIL – Consumers’ expectations for annual inflation retreated 0.2 percentage points, going from 5.3 percent in July to 5.1 percent in August. In comparison to the same month in 2018, the retreat was 0.6 percentage points.
This was the second consecutive reduction since June, when it stood at 5.4 percent. The information was released today, August 21st, by the Brazilian Institute of Economics of the Getulio Vargas Foundation (IBRE-FGV).
The indicator rose from 37.7 percent in July to 43.4 percent in August, for the share of consumers projecting values below the inflation target for 2019 (of 4.25 percent). This is the highest increase in the past six months.
Nevertheless, the proportion of consumers expecting values within the upper and lower limits of the inflation target for 2019 (between 2.75 percent and 5.75 percent) varied 0.2 percentage points, reaching 57.8 percent.
According to salary ranges, families with a monthly family income above R$9,600.00 (US$2,400.00) showed the highest drop in August in median inflation expectations for the following twelve months. In this case, median expectations decreased 0.4 percentage points to 4.1 percent, the same level recorded in the first quarter of this year. Consumers with an income of up to R$2,100 were the only group to foresee an increase, up 0.1 percentage points, reaching 6.0 percent. It rose by 0.1 p.p., reaching 6.0%.
According to Renata de Mello Franco, an economist at IBRE-FGV, the favorable inflation trajectory observed in recent months has continued to positively influence consumer expectations in all income ranges, although the decrease could have been greater had consumers not felt the impact of a hike in energy and food prices.
“The increase in electricity prices in July and August and the slowdown in the drop of food prices may have posed an obstacle to a greater reduction in expectations, particularly in the low income range, which showed an increase,” she explained.