Brazil Inflation up 0.89% in November, Highest for Month in Five Years

RIO DE JANEIRO, BRAZIL – The scenario remains much the same, with the pressure of food prices concerning consumers when going shopping, and inflation continues to rise.

According to data released by the Brazilian Institute of Geography and Statistics (IBGE) on Tuesday, December 8th, the National Broad Consumer Price Index (IPCA) in November stood at 0.89%, posting a slight increase over October (0.86%) and the highest result for the month in five years. In addition to food, both inside and outside the home, the hike in fuel prices also pressured the indicator.

Inflation has accumulated a 3.13% hike in the year and 4.31% in the 12-months through October, up from 3.92% in the immediately preceding 12 months. The inflation target this year is 4% and the consecutive hikes in the index are already leading the financial market to point out that the IPCA will close the year over the target.

With the rise in the indicator, there is pressure on the Monetary Policy Committee (COPOM ), which should announce its decision on the basic interest rate in the economy today, December 9th. Although the Committee argued in past meetings that the rise in inflation is somewhat short-lived, the price trend can not be ignored.

According to IBGE, foodstuffs that had already been pressuring the family food basket, such as rice and soybean oil, continued to rise (up 6.28% and 9.24%, respectively) in November. However, other items that comprise the Brazilians’ table have also become more expensive on the market.

The rise in meat prices was the highest in the group, with a 6% hike. In November last year, meat also recorded a sharp rise (8%) due to the increased export of the food. However, the more generalized hikes in the period in 2020 show greater inflationary pressure, since the IPCA in the same period last year stood at 0.51%. The price of potatoes, which rose by 30%, and tomatoes (18.45%) also weighed in.

“The rise in food prices has had the greatest influence in recent months, which can be explained by two factors: on the one hand, there is an increase in demand, sustained by the aid granted by the government, and on the other, there is restricted supply on the domestic market in a context of higher exchange rates, which encourages exports,” explains Pedro Kislanov, IPCA manager.

In the case of beef, for instance, China bought 10% more than in November last year, according to a survey conducted by the Brazilian Slaughterhouse Association (ABRAFRIGO). Of the 197,000 tons of meat shipped in the month, 123,000 were bound for China, according to the Ministry of Economy.

In addition to the pressure of food prices for home consumption (3.33%), there was also a rise in eating out. With the resumption of activities and the relaxation of social distancing, the activity in restaurants increased and so did some prices. Beer, for instance, became 1.33% more expensive and soft drinks and mineral water increased by 1.05%. Last month, these items had dropped 0.36% and 1.21%, respectively.

There was a rise in nearly all sectors, except education and health and personal care. The transport group was up by 1.33%, and was the second main influence on the November index. The group’s inflation was driven by the increase in gasoline prices (1.64%).

“It’s the sixth consecutive hike in gasoline and, moreover, we had a 9.23% rise in ethanol and other components that weigh heavily in transports, as is the case of both new and used cars,” says the researcher, also stressing the increases in voluntary vehicle insurance and app transports. Together, the food and beverage and transports groups represented approximately 89% of the November IPCA climb.

“May was the last month in which we had deflation, a drop of 0.38%. Since June we have had positive fluctuations and November is the highest in the year. The hike in food prices in recent months has been the most influential factor,” explains Kislanov.