Pine Economic Calendar: Short-term inflationary pressures
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The IGP-DI general price index for July in Brazil rose sharply to 1.52% above estimates, driven by higher agricultural commodity prices. This is expected to keep inflation indices elevated in the near-term, leading the authors to revise their year-end inflation projections upwards. The IPCA consumer price index for July is also forecast to rise to 5.2% year-over-year due to ongoing pressures from food and other items. While inflation remains a concern, the authors believe prospects are not as worrisome for the central bank compared to previous supply shocks.
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Pine Economic Calendar: Short-term inflationary pressures
- 1. Pine Economic Calendar: Short-term inflationary pressures August 6, 2012 BRAZIL IGP DI - July The IGP-DI general price index for July rose sharply from 0.69% in June to 1.52% and was above the IGP-10 (0.96%) and IGP-M (1.34%) indices for the month. Our estimates based on the recent performance of international commodity prices (highlighted by corn, soybeans and, on a lesser scale, wheat) in a situation in which the Real is relatively stable, indicate that the IGPs will remain at high levels during August, peaking in the IGP-10 index and then slowing. As a result, we are revising our projections for the IGPs at the end of the year from 7.0% to 7.4%-7.9%. The main negative (or inflationary) contributions to the July result remained the higher price of agricultural products such as soybeans and by-products, corn, and some perishable items like tomatoes. The variation in the IPA wholesale index remains high and is gaining force, jumping from 0.99% to 5.31%. The IPC-DI is following the performance of the weekly IPCs calculated by the FGV-RJ business school, with the variation remaining under control at 0.22%. Despite some positive contributions (in terms of lower inflation and/or deflation), the consumer indices remain under pressure, with the Transport, Clothing and Food items rising again. Finally, the INCC-M construction sector index continues to reflect to a lesser extent the wage adjustments that occurred in the middle of the year, sliding from 0.73% to 0.67%. IPCA - July The July wholesale price index should expand by 0.39%, above the June result (0.18% by the IPCA-15 and 0.08% by the IPCA). If our estimate is confirmed, the IPCA accumulated over 12 months will rise to 5.2% from the final rate of 4.9% for the previous month. This would be the first increase since September 2010. Industrial goods should show more contained deflation following the IPI tax reduction period, also helped by the sales period in the Clothing item. The Food Consumed at Home item should be higher than in June, with the ongoing pressure from some perishable foods. Controlled Prices should remain constrained and in line with the previous variation (0.15%) in the absence of any large readjustments. Services should show big increases spread widely. As with the July preview, there will be a new round of wage increases for domestic workers. To sum up, a breakdown of the IPCA should be negative, with the risk of the median estimates (0.38% according to Bloomberg and 0.36% according to the Focus Report) being surprisingly negative (in terms of higher inflation). As we have stated on previous occasions, we expect a slight increase in the monthly figures for the quarter that got underway in August of between 0.35% and 0.40%. The worsening in producer prices is leading us to revise our estimate for the IPCA at the end of year from 4.8% to 5.0%. However, we would stress that the outlook for inflation is not a matter of concern, particularly for the Central Bank, as long as the prospects remain weak for the global economy. At the same time, unlike the supply shock in 2010, the current cycle: (i) is more concentrated on some commodities; and, (ii) is not being accompanied by big rises in live cattle prices, factors that ease the prospect of a worsening in terms of inflation. Marco Antonio Maciel Marco Antonio Caruso Chief economist Economist Banco Pine Banco Pine 1
- 2. PINE Time Country Indicator Date Consensus Previous Estimate Monday, 06/08/2012 Euro 05:30 Zone Investor Confidence Aug/12 08:00 Brazil IGP-DI Jul/12 10:30 Brazil Vehicles Sales and Production Jul/12 15:00 Brazil Weekly Trade Balance 05/Aug 15:15 US Senior Loan Officer Opinion Survey 3Q12 Tuesday, 07/08/2012 07:00 Germany Industrial Orders Jun/12 09:00 Brazil Regional PIM Jun/12 11:00 Brazil Level of Use of Installed Capacity Jun/12 16:00 US Consumer Credit Jun/12 Wednesday, 08/08/2012 03:00 Germany Current Transactions Jun/12 03:00 Germany Trade Balance Jun/12 06:30 Germany Bond Auction (Notes) EUR4.0B - 06:30 UK Inflation Report - 07:00 Germany Industrial Production Jun/12 08:00 Brazil IGP-M (1st Preview) Aug/12 st 08:00 Brazil IPC-S (1 Forecast) Aug/12 09:00 Brazil IPCA Jul/12 09:30 US Work Productivity 2Q12 09:30 US Work Unit Cost 2Q12 12:30 Brazil Weekly Currency Flow weekly 22:30 China Consumer Price Jul/12 22:30 China Producer Prices Jul/12 Thursday, 09/08/2012 02:30 China Industrial Production Jul/12 02:30 China Retail Sales Jul/12 08:15 US Leading Indicators May/12 09:00 Brazil Regular Survey of Agriculture Production Jul/12 09:30 US Trade Balance Jun/12 09:30 US Jobless Claims weekly 370,000 365,000 11:00 US Wholesale Inventories Jun/12 Friday, 10/08/2012 03:00 Germany Consumer Prices (Revised) Jul/12 09:00 Brazil Industrial Employment and Wages Jul/12 09:30 US Exports/Imports Prices Jul/12 World Agriculture Supply and Demand 10:30 US (Estimate) - 15:00 US Monthly Fiscal Result Jul/12 2
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