While others struggle with inflation, Brazil registers the biggest price drop in 42 years

Brazil registered deflation -a drop in the price index- of 0.68% in July. This was the first drop in the IPCA (National Wide Consumer Price Index) since May 2020 (-0.38%). It was also the biggest drop recorded in the historical series, which started in January 1980 – 42 years.

The IBGE (Brazilian Institute of Geography and Statistics) released the result this Tuesday (9). The previous record was set in August 1998, when there was a deflation of 0.51%.

The drop in the IPCA (National Wide Consumer Price Index) was slightly higher than the financial market projections obtained by Poder360. Analysts estimated deflation of 0.66% or more in June.

In the year, the IPCA accumulates a high of 4.77%. The index slowed down in July in relation to June in the accumulated over 12 months. The rate went from 11.89% to 10.07%. Still, it has been above two digits for 11 months. This is the lowest percentage since August 2021, when the 12-month high was 9.68%.

July’s deflation was driven mainly by the transportation group, which dropped 4.51% in prices. Fuel prices dropped 14.15%. Gasoline dropped 15.48%, and ethanol, 11.38%. Only diesel oil went up: +4.59%.

On June 23, President Jair Bolsonaro (PL) sanctioned the bill that limits the ICMS (Value-Added Tax on Sales and Services) on diesel, gasoline, electric energy, communications, and public transportation.

Of the 9 groups surveyed, there was deflation in two: prices in the housing group dropped 1.05%. Electricity slid 5.78% in the month. The food and beverage group rose 1.3% in July.