Brazil’s General Price Index-10 (IGP-10) reopened the year under renewed pressure from producer and consumer prices, recording an 0.29% uptick in January, according to data released by the Getulio Vargas Foundation (FGV) on Friday.

That was followed by a tiny, but positive, 0.04% increase in December, meaning that year-start monthly price dynamics clearly picked up in January.

Despite a stronger result in January, the index has been in decline for some time.

The IGP-10 has decreased by 0.99% year-to-date through September, indicating that recent improvements were unable to reverse the 12-month decline.

A Reuters survey of economists predicted a 0.25% hike, but this was slightly higher.

Wholesale prices rise, driven by resource extraction and energy

The Broad Producer pricing Index (IPA-10), which tracks wholesale pricing movements and accounts for 60% of the total IGP-10, increased by 0.24% in January.

This was a reversal from the previous month’s 0.03% fall and contributed significantly to the headline index’s rise.

According to Matheus Dias, an economist with FGV IBRE, the producer price index was “mainly influenced by the mineral extraction segment, led by iron ore.”

He also mentioned the impact of fuels, specifically hydrated ethyl alcohol, or ethanol.

Ethanol prices jumped 4.59% over time, which Dias attributed to fewer stockpiles and strong demand during the off-season.

These factors combined to boost wholesale prices back into positive territory following December’s minor dip.

Consumer inflation gains pace amid seasonal factors and food prices

Consumer prices also helped to boost January’s results. The Consumer Price Index (IPC-10), which accounts for 30% of the IGP-10, rose 0.39% in January, up from 0.21% in December.

Dias observed that consumer prices normally rise at the start of the year, reflecting seasonal variables like the return to school. In this environment, the Education group experienced a considerable growth of 1.27% in January.

At the same time, he predicted that food costs would rise again, putting more pressure on household inflation.

The Food group increased by 0.50% during the month, contributing to the overall rising trend in consumer prices.

The combined effect of increased education costs and higher food prices helped explain the greater rate of consumer inflation, which contributed to the overall acceleration of the IGP-10.

Construction costs also climb

The National Construction Cost Index (INCC-10), which measures price changes in the construction industry, rose by 0.47% in January.

This marked a significant increase over the 0.22% increase reported in December, adding another source of upward pressure to the composite index.

While the INCC-10 has less weight than wholesale and consumer prices, its larger monthly increase contributed to the overall image of rising price pressures across the economy at the start of the year.

The data implies a methodology and outlook

The IGP-10 is calculated using price changes between the 11th day of the previous month and the 10th day of the reference month.

By combining producer, consumer, and construction prices, the index provides a comprehensive picture of inflationary tendencies at all phases of the economy.

January’s figures show a synchronised acceleration across all three components, which helps explain why the headline index outperformed market forecasts.

At the same time, the persistent negative reading over the last 12 months underscores the contrast between short-term momentum and longer-term trends, implying that, while pricing pressures increased at the beginning of the year, they remain limited when assessed over a longer period.

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