IPCA-15 has positive readings from economists, despite ​​a surprise in air tickets

Despite the surprise at the scale of October’s increase in air ticket prices, which affected service prices, the monthly IPCA-15 data released this Thursday (26) by IBGE was seen by economists as benign and a source of relief for the Central Bank’s future decision-making. Experts noted the continuation of the slowdown of the cores of the indicator, basic services and the diffusion index for the month.

The country’s official inflation preview rose 0.21% for the month, slightly above the Refinitiv consensus forecast of 0.20%.

Laiz Carvalho, Brazil economist at BNP Paribas, comments that the bank’s forecast was even lower than the market average (0.18%), but the unexpected swing of almost 24% in the price of air tickets, which is considered very volatile, was almost twice the estimate – this directly affected the transport group.

But she considered that in general IPCA-15 can be considered very good not only because of the composition itself, but also because of the main indicators. The average value of these indicators was 0.23% compared to market expectations of 0.30%. “And while the number of services increased due to air tickets, core services were 0.14% lower than we expected,” he estimates.

The trend of slowing inflation continues, and this is good news for BC, even in a scenario of significant volatility and global uncertainty, emphasizes Lyse. “BC’s path should not change in 2023. We still expect a 50 basis point decline at next week’s meeting to 12.25%. And at the end of the year, another decrease of 50 points, while Selic closed at the level of 11.75%”, – he predicts.

In addition to these highlights, Claudia Moreno, economist at C6 Bank, notes that food prices at home continued to fall, falling by 0.52% in October. “For this group, which has an important weight in the calculation of inflation, this was the fifth deflation in a row. One of the highlights of the group is the deflation of milk and milk products (-2.8%), which accumulates a fall of 6.3% over 12 months. It is worth reminding that last year milk and dairy products in general became more expensive by 22%,” he compares.

Claudia also notes that inflation has already shown a slight slowdown at the margin over the past 12 months, falling from 5.6% to 5.4% by October. “Central Bank cores are also slowing in this measure, accumulating growth of 4.8% through October, down from the 5.1% measured through September,” he notes.

Even with this behavior, the C6 Bank economist continues to believe that services inflation will remain resilient due to the hot labor market. “We maintain our forecast, according to which inflation at the end of the year should be 5.2% and rise to 5.5% in 2024,” he suggests.

Andre Núñez de Núñez, Sicred’s chief economist, also attributed the deviations from forecasts to airfares, but noted that this was partly offset by a weaker reading of industrial goods -0.01% compared to expectations of +0.08%. This was driven by a fall in durable goods (-0.16%), with an emphasis on used cars (-0.87%) and handsets (-1.7%).

In services inflation, it singles out core prices, which remained at 0.14% compared to a forecast of 0.32%, especially prices for voluntary motor insurance (-2.19%) and car repairs (-0.39%).

“As a result, inflation in this important group for Copom continued to slow over the past 12 months from 5.2% to 4.9%. This is a significant slowdown, thus providing security for Copom to continue to ease monetary policy at the current pace,” he comments.

Inflation at target level

Raffaello Vittorio, Inter’s chief economist, says the slowdown in the IPCA-15 to 0.21% for the month indicates that official inflation will remain within the target this year. “The data release shows a very benign quality, with a drop in the core average as well as core services. “Diffusion also remains low at 47%, indicating that the fall in inflation is wider,” he says.

The economist also comments that the data indicates that activity should remain weaker at the start of the 4th quarter, a scenario that should allow the Selic to continue to decline.

“In fact, the scenario is compatible with an acceleration of interest rate cuts, but an external scenario with more volatility and higher interest rates on US Treasury bonds increases uncertainty and should indicate continued caution in terms of monetary policy easing. We still expect a 50% reduction in the next 3 meetings and a final Selic of 9% in 2024.”

Alex Agostini, chief economist at Austin Rating, attributed the drop in margin inflation — from 0.35% in September to 0.21% in October — to the drop in gasoline, noting that the gauge released today doesn’t even take into account the recent downward revision to prices announced by Petrobras”. That is, in November, the indicator may again have a very moderate result,” he suggests.

Regarding the diffusion index, Agostini notes that the average for 2023 is 54.9%, well below the average of 70.115 observed from January to October 2022. measures to increase interest rates. This allows BC to continue lowering the Selic rate by at least 0.50 percentage point at the meeting on November 1,” he predicts.

Austin revised its full-month IPCA forecast down from 0.25% to 0.17%. “As a result, we also revised the forecast for the year – from 4.70 to 4.50. Therefore, BC will meet the inflation target this year, something that was almost unthinkable three months ago,” says Agostini.

Andrea Damico, chief economist at Armor Capital, also cites core services excluding changes in airfares, a contraction in core metrics and a continued slowdown in industrial goods growth as highlights of the month. “In terms of openness, disaggregation, the data has been very supportive and beneficial for inflation,” he confirms.

She also believes that today’s data confirms the continuity of the downward cycle imposed by BC, despite a more complex external scenario with more risk vectors. For Andrea, Copom will continue to cut interest rates by 50 basis points due to this benign trend in current inflation. “And this is happening in cores, in industrial goods and in basic services,” he emphasizes.

This benign trajectory is also emphasized by Gustavo Sung, chief economist of Suno Research. “Overall, this IPCA-15 does not change our scenario. The latest data shows that inflation in Brazil remains more under control. In addition, the Focus newsletter continues to demonstrate the stability of inflation expectations,” he reminds.

He also mentions that for 2023, the market has already started to project final inflation within the target range, although over longer periods it has remained stable for several weeks – just above the target of 3.0% – due to the uncertainty that exists in scenario such as fiscal risk.

“The central bank sees an improving scenario, but inflation should continue to show clear signs of moving closer to the target, especially core measures to continue the path of interest rate cuts,” he analysed.

Rafael Costa, macro strategy group analyst at BGC Liquidez, for his part, comments that there is a view of a consistent disinflation scenario, supported by today’s good results in core services inflation and the core average.

According to Arian Benedito, an economist at Esh Capital, the quality of the indicator leaves no doubt about the gradual slowdown of Brazilian inflation, although it should increase slightly in the last months of the year. “However, this factor is already factored into our final inflation forecasts of 4.6% for 2023.”

In Itau’s analysis, core inflation in both services and manufacturing was better than expected, strengthening the inflation data sequence with a benign break.

“On a three-month moving average, with seasonally adjusted and annual data, the IPCA-EX3 core services and goods reading slowed to 2.8%, compared to 3.3% in September and 6.3% in June this year. Diffusion metrics, both for the full index and the IPCA-EX3 core, continued to show further declines, signaling more disinflation,” the bank’s analysis said.

Relatives