Slowdown in China's economy influences IGP-M, according to IBRE

The General Price Index - Market (IGP-M) - calculated by the Brazilian Institute of Economics (FGV/IBRE) - decreased in February, with a 0.38% change, while in the previous month this change was 0.48%. Salomão Quadros, economist at the Brazilian Institute of Economics (FGV/IBRE), explains the influence of each component in the IGP-M decrease. The Consumer Price Index (CPI) had the biggest decrease, and thus, it was the index that weighed more in the total decline. However, in general, the three components influenced this result almost in the same way, he said. In a more detailed analysis, each index was influenced by specific issues. The decrease in the Broad Producer Price Index (API), for example, is explained by the slowdown in iron ore, as a result of the slowdown in the Chinese economy. Beef, poultry and soybeans also contributed to the decline in the index. As for the IPC, there are factors that showed acceleration, although the overall effect is a setback. Regarding the IPC, foods led the decrease, and in January, the impact of school tuitions began to decline. However, some services are rising. With the minimum wage adjustment, the service of domestic employees is an example. Finally, the increase in bus fares in Rio de Janeiro also shows as an influence on the IPC. Despite the overall decline, it is important to note what is accelerating, says Quadros. In addition, the National Index of Construction Cost (INCC) had a significant slowdown from 0.70% to 0.44%, driven mainly by labor. Drought may influence IGP-MFor March, the drought experienced in recent months by most states may be a factor with major influence on the IGP-M, generating a fluctuation in the index. This month the effect of drought appeared timidly on the IGP-M. For March, it may be a little different. I believe that it will not deviate much the inflation rate from a soft deceleration trajectory, at least in the food and agriculture area. Anyway, the drought can bring some fluctuation in the index rate, and perhaps, it can even generate acceleration, but nothing that would change the soft decrease trend, he analyzed.