Lower Ethanol Prices Help Brazilian Inflation Go Down

The Broad Consumer Price Index (IPCA) rose 0.21% in April, a slackening down from March’s 0.43% pace. Over the first four months of the year, the cumulative increase in the index totaled 1.65%, substantially lower than the 2.68% registered during the same period last year.

In April, 2005, the IPCA, which the government uses to fix its inflation targets, was 0.87%. These data were released this Wednesday, May 10, by the Brazilian Institute of Geography and Statistics (IBGE).

According to the IBGE, the deceleration in April was mainly the result of a more abundant supply of agricultural goods and a settling down of fuel alcohol prices.

Commercialization of the sugarcane harvest led to a 0.11% drop in fuel alcohol prices, which had been climbing since July of last year, to the extent that in March of this year consumers were paying 27.41% more than in December, 2005.

Following the trend in alcohol prices, gasoline prices also decreased. In March, gasoline, which had been increasing in price in function of both the rise in alcohol prices and the temporary hike in the gasoline content of the gasoline-alcohol mixture sold at the pumps, was the item that most contributed to the rise in inflation. Gasoline cost consumers 4.50% more in March than in December, 2005.

Besides fuel prices, there were also reductions in the prices of TV, sound, and computer equipment (-1.26%), home appliances (-1.06%), and interstate bus fares (-1.67%).

Data to calculate the IPCA are gathered in the metropolitan areas of Belo Horizonte, Fortaleza, Porto Alegre, Curitiba, São Paulo, Rio de Janeiro, Recife, Belém, and Salvador, as well as in the cities of Goiânia and Brasí­lia, and reflect the outlays of families that earn between one and 40 minimum wages.

Agência Brasil

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