IPCA-15 showed acceleration in administered prices and pressured cores, say analysts

A more detailed analysis of the November IPCA-15, which increased by 0.53% compared to October, points to an acceleration in managed prices and stability in market prices in the “preview” of official inflation, experts point out.

Although fuel prices, especially gasoline, and food prices have driven inflation in the month, the data released today by the IBGE came in a little lower than expected.

CM Capital highlighted the movement in automotive fuel prices in the period, which returned to inflation after a few months of decline. “Even without readjustment of fuel prices by Petrobras, the price of gasoline and ethanol has gone through upward adjustments in recent weeks, as determined by the ANP and other inflationary indicators”, he says in a report.

It was also mentioned that the average of the indicator cores remained practically stable compared to the previous result (0.56%, in the monthly comparison of October, compared to 0.55% in November). All cores monitored by CM Capital showed high inflation concentrated at a narrow level. “This movement reinforces the bad characteristic of the indicator, which, regardless of the characteristic of the core, suggests pressure in the short and medium term”, states the report.

Goldman Sachs says, in a report signed by chief economist Alberto Ramos, that the indicator was higher than expected in semi-durable industrial goods, clothing, personal hygiene and communications. This behavior was offset by lower-than-expected data on food eaten inside and outside the home and on personal expenses.

“Compared to October, the acceleration of inflation in November reflected the impact of increases in airline tickets, fuel, electricity, food and industrial goods”, he highlights.

Ramos also mentions the behavior of fuels in the month, with the negative contribution of recent months being reversed in November (increase of 2.04%), driven by gasoline and ethanol.

For Goldman Sachs, in general, the dynamics of underlying inflation are still challenging, given the still widespread pressures on basic and service inflation in a scenario of tight labor market, the expectation of deterioration in the mix of macro and micro policies and a major fiscal expansion in 2023.

“Furthermore, inflation may prove to be inertial due to the intensification of retroactive price and wage setting mechanisms, with readjustment of wage contracts incorporating cost of living adjustments”, predicts the investment bank.

BTG Pactual assesses that the November IPCA-15 was driven by volatile items, but warns that the core average increased from 0.47% in the monthly comparison between September and October, to 0.53% between October and November. And also that the spread of the rise in services, a segment that the BCB remains vigilant, went from 61.5% to 64.6%.

“Despite the marginal improvement in recent inflationary dynamics, we observe a deterioration in the outlook for prices for 2023, driven by the possible partial reversal of the 2022 tax cuts and proposals for fiscal expansion”, says the bank.

However, a possible improvement in production bottlenecks and better prospects for the next harvest may result in a lower inflation trajectory for industrial goods and fresh food.

Itaú also warns in a report that the underlying core for services and industrials continued to decelerate from recent peaks, but the underlying industrial and services components were above the bank’s expectations. “The disinflation process will be erratic and gradual. Our projection for the IPCA at the end of 2022 is 5.8%”, he predicts.

For Luca Mercadante, economist at Rio Bravo, the November result showed some improvement in underlying services and cores, but as the measures are still under pressure, they are not enough to guarantee a consolidated disinflation process. “Thus, we continue to anticipate that the Central Bank should keep the interest rate at a terminal level in the next meetings, and will only start discussing reductions when this process becomes clear”, he says.

The formula of Álvarez Agis: “Devaluate and raise wages”

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