July 6, 2022

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How does inflation affect the daily lives of Brazilians?

How does inflation affect the daily lives of Brazilians?

Understand how high inflation is affecting the Brazilian economy and what the expectations are for the coming months.

Estimated reading time: 3 Minutes

The purchasing power of Brazilians has increasingly declined as inflation escalates. Common items in daily life, such as cooking gas, food, gasoline and electricity, show a huge price hike, directly affected by high inflation.

According to the Broad Consumer Price Index (IPCA) – the official measure of inflation – the rate recorded in April 2022 was 1.06%, the highest for that month since 1996.

Increase in the value of the basic food basket due to inflation

Baskets of staple foods, considered essential in daily life, increased by 5.11% in the first months of this year, according to a survey by ABRAS (Brazilian Association of Supermarkets). This increase comes as a result of shifting food production costs, especially with the rise in diesel prices, which is the responsibility of shipping the logistics services for the products.

To make the example more clear, coffee, which is in the morning for Brazilians, has accumulated in the past 12 months by 67.53%.

Public transportation also suffers from high rates of inflation. Given that many people depend on these modes of transportation on a daily basis, the effect is direct. Bus prices are up 4.46% in one year. On the other hand, the subway underwent a 3.64% adjustment in the month of April alone.

How is IPCA calculated?

IPCA (Broad Consumer Price Index) has been calculated by IBGE (Brazilian Institute of Geography and Statistics) since 1980. Its objective is to show price changes for different products and services every month.

377 items were analyzed, according to the Household Budget Survey, which records what families consume. The items examined fall into nine groups: housing, food and beverage, clothing, transportation, household items, health, expenses, communications, and education.

For the survey, the IPCA checks prices in 10 metropolitan areas of the country. The general indicator is determined from a weighted average of prices, taking into account monthly changes.

What are inflation expectations?

According to economists, inflation should be more than double the value set by Copom (Monetary Policy Committee), to close to 8%. A decrease is likely in the second half of this year, however, it will not represent a decrease or stabilization, since prices will only rise to a lesser extent.

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