Price of Food Boosts Brazil Inflation to 5.63%, Well Above Government’s Target

Farmers Market in Bahia Inflation (IPCA – Consumer Price Index) reached 0.83% in November, in Brazil, the highest monthly level in more than five years. November 2009 the index was 0.41% and last October 0.75%. The pace of price rises has not been this fast since April 2005, when it reached 0.87%.

The IBGE (Brazilian Geographic Statistics Institute) bureau says annual inflation for the 12-month period ending in November reached 5.63%, well above the yearly inflation target of 4.5%. IBGE says that inflation totaled 5.25% between January and November, against 3.93% in the first 11 months of 2009.

Once again the food item was the most ‘inflationary’ having increased 2.2% in November, which represents 60% of the overall 0.83% index, according to Eulina Nunes dos Santos, IBGE prices department coordinator.

“There has been a confluence of strong overseas demand and from the domestic market, basically because of greater purchasing power from consumers”, said Nunes dos Santos.

“Meats soared 10.7% in November, which represents 30% of the overall monthly index,” said the statistics professional who added that in 2009, food prices (3.18%) helped to contain the IPCA index but this year “with 8.95% they represent the main inflationary thrust”.

IPCA data of the last eleven months show that 39 items are responsible for 90% of the IPCA accumulated variation, i.e.: meats, 26.79%; home staff, 11.02%; repairs, 8.47%; schools, 6.64%; urban transport, 7.47% and health schemes, 6.24%.

Regarding December Nunes do Santos said that there are no administered prices pressures during the month, which means it “all boils down to food prices”. Other economists believe December will see a relief in the advance of prices because of softer performance of food items.

“Cereal prices are under control, beans and rice are flat although the big challenges are meats and sugar. But December should see a halt in the increase in cattle prices so we anticipate more contained sector prices, with less intensity in food prices and therefore a more stabilized December,” said economist Silvio Campos Neto from Banco Schahin.




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