Diffusion shows more subitems with increases in August than in July, says IBGE analyst

Although the country saw deflation in August, the decline was more concentrated in items with a significant weight in the household consumption basket, such as residential electricity and food. Overall, price increases were more spread out among the items surveyed in August than in July.

The assessment is by Denise Cordovil, analyst at the National Price Index Management of the Brazilian Institute of Geography and Statistics (IBGE).

The Broad National Consumer Price Index (IPCA) cooled from a rise of 0.38% in July to a fall of 0.02% in August. The diffusion index, which shows the percentage of items with price increases, fell from 47% in July to 56% in August.

“The diffusion index has more subitems with positive results in August than in July. The impact of subitems that fell was greater than those that rose,” said Cordovil. “The negative impact of food and electricity had a greater weight, contributing more to the fall, although in August there was a greater spread (of price increases among the items surveyed),” he added.

Within the Housing group, the 2.77% drop in residential electricity provided the greatest relief to inflation in August, contributing -0.11 percentage points to the -0.02% rate recorded in the month by the IPCA. Spending on Food and beverages fell 0.44%, an impact of -0.09 percentage points. The Food and Housing groups together account for 36.53% of the IPCA.

According to Cordovil, the greater supply of food has contributed to the fall in prices.

“Historically, at the beginning of the year, we have higher temperatures and more intense rainfall. And in the middle of the year, the temperature is milder and the amount of rainfall decreases, which ends up favoring food prices,” corroborated André Almeida, manager of the IBGE’s National Price Index System.

Three foods were in the ranking of the five main negative impacts on the IPCA in August: potatoes (-0.06 percentage points), tomatoes (-0.04 pp) and onions (-0.04 pp).

The IPCA is made up of a consumption basket of 377 sub-items.