By LAURO MATTEI*
Food and transport continued to put pressure on inflation in January 2025
Introduction
The topic under debate at the moment continues to be rising inflation, since this is the fourth consecutive month that the accumulated inflation rate has exceeded the ceiling established by the National Monetary Council (center of the 3% target, with an additional 1,5% as a ceiling). Of the nine groups surveyed by the IPCA,[I] transport and food and beverages were the ones that contributed most to inflation remaining above the ceiling, highlighting that this was the fifth consecutive month of increases recorded in the food and beverage group.
In Brazil, the IBGE (Brazilian Institute of Geography and Statistics) developed two statistical instruments to measure the inflationary process: the INPC (National Consumer Price Index) and the IPCA (Broad Consumer Price Index). The first index analyzes the variation in the average cost of living for families with a monthly income ranging from 1 to 5 minimum wages. The IPCA considers the variation in the average cost of living for families with a monthly income between 1 and 40 minimum wages.
In general, it can be said that the IPCA measures the variation in prices of a basket of goods and services consumed by the population, revealing the variation in these prices in a given month in relation to the previous month. These variations accumulated over twelve months indicate the inflation of each year in the country. Furthermore, the IPCA takes into account not only the variations in prices of each group, subgroups and items, but also the weight that each of these groups has in the family budget.
In the specific case of the IPCA, the IBGE conducts a monthly survey in 13 urban areas of the country involving approximately 430 thousand prices recorded in 30 thousand locations. These prices are compared with the prices of the previous month to obtain the real variation in consumer prices on that exact date. This procedure allows us to understand possible changes in the purchasing power of salaries.
For example, if in a given year the variation in prices (IPCA) is greater than the variation in wages, this means that there has been a reduction in purchasing power because the prices of goods and services have risen more than the person's income level. This is the reason why the country adopted the IPCA as the official index to measure inflation, both monthly and annual.
The objective of this article is to briefly analyze the current behavior of inflation, emphasizing the groups of products and items that most influenced the maintenance of inflation at high levels in January 2025, considering that the target of the Lula III Government is an annual inflation of 3%.
Monthly and accumulated inflation over the last 12 months
After the peak recorded in November/24, the data indicate that the inflationary process is beginning a downward trajectory, even though it remains above the target ceiling stipulated by the National Monetary Council (CMN), as shown in Chart 1. Thus, it is noted that the drop recorded in December/24 was followed by an even greater drop in the first month of the current year. Even so, it should be noted that January 2025 represents the fourth consecutive month with rates above the target ceiling, meaning that the remedy used by the country's monetary authorities (raising interest rates) has not yet had the expected effects.
Figure 1: Accumulated variation of inflation in the country in 12 months
After three consecutive months with high percentages, it is noted that in the first month of this year there was a slight decline in the monthly composition of the index, although not enough for the target to be met.
Graph 2 shows the monthly variation in inflation over the last 12 months. Initially, it is important to check the difference in level between January 2024 and the percentage variation in January 2025, the month that recorded the lowest variation in the first month of the year since the beginning of the Real (1994). A variation similar to the current one was recorded in March 2024, also drawing attention to the negative variation recorded in August 2024.
From then on, there was an increase in prices in all other months of 2024, with a strong variation in the months of October (0,56%) and December (0,52%). This was a period in which the acceleration in food prices was decisive in keeping monthly inflation high and, at the same time, contributing decisively to the target not being met.
About this particular aspect, on the website of Zero Hunger Institute There is a set of studies and articles that seek to explain the causes that promoted this rise in food prices.
graphic 2: Monthly variation of inflation in the country between January/24 and January/25
The groups responsible for the recent high inflation
It is important to note that in January/25 the variation was 0,36 percentage points below the variation in the last month of 2024. Therefore, it is essential to analyze the movements that are taking place in each of the groups of goods and services that make up the inflation index captured by the IPCA in order to adequately understand their impacts.
Table 1 shows the different groups that make up the IPCA, the variations that occurred in January/25 in relation to the previous month and the impacts of each of these groups on the overall calculation of monthly inflation. Historically, four of these groups (Food and beverages, Housing, Transportation and Health and personal care) account for approximately 75% of inflation. Hence the importance of analyzing in detail the movements that occur internally in some of these groups in order to better understand the current dynamics of the inflationary process.
In this case, it is noted that the Transport group presented the greatest variation among all the groups considered, that is, a variation of 1,30% in relation to the variation of 0,67% recorded in December/24. Consequently, its impact on the monthly inflation index rose to 0,27 percentage points, whereas in the last month of 2024 it was 0,14, that is, it practically doubled in just one month.
According to the IBGE, this increase is largely due to increases in airfares and increases in urban bus fares in practically all state capitals at the beginning of 2025. And the justification for these increases was the increase in fuel prices, especially gasoline, diesel oil and ethanol.
The Food and beverage group showed a variation of 0,96%, the second highest among all other groups, while in December/24 it registered 1,18%, the highest variation in that period. Consequently, this reduction caused the impact of this group on the general index to fall to 0,21 percentage points.
According to the IBGE, this was the fifth consecutive month with an increase in this group, and in January 2025, ground coffee continued to increase (8,56%), along with increases in the prices of carrots, tomatoes, etc. It was only recorded that long-life milk had a decline after months of rising prices.
The Housing group showed a negative variation of -3,08%, the largest among all the observed retractions, whereas in December/24 a retraction of -0,56% had already been recorded for this group. Consequently, this reduction caused the impact of this group on the general index to fall to -0,46 percentage points, whereas in December 2024 this impact had already been of -0,08.
According to the IBGE, this behavior is related to the 14,12% drop in the cost of residential energy resulting from the incorporation of the Itaipu bonus in the January 2025 bills. Therefore, it can be said that the behavior of the energy price was decisive in promoting a retraction in the monthly inflation index, since increases in water and sewage rates continued to be recorded.
The Health and personal care group increased its variation from 0,38% (December/24) to 0,70% (January/25). As a result, the impact of this group on the general index rose from 0,05 to 0,09 percentage points in the same period.
Tabela 1: variation and impacts of each group that makes up the IPCA. January/2025
The education group showed a positive variation of 0,15% between December/24 and January/25, which contributed to doubling the impact of this group on the overall index, although this impact continues to be extremely low compared to the other groups. To a large extent, this percentage variation can be explained by the annual period, since January is the typical month in which school materials need to be purchased and school enrollments need to be renewed.
Two other mentions are relevant, both related to the percentage drops observed in the first month of this year. On the one hand, the clothing group suffered a percentage reduction of 1,0%, reducing its impact on the general index and, on the other hand, the communication group had a variation of -0,54%, making its impact also negative, that is, it contributed to the reduction of the general index.
Finally, it should be noted that the Personal Expenses group showed a variation from 0,62% in December/24 to 0,51% in January/25. Even so, it continued to exert an impact of 0,05 percentage points on the inflation index of the first month of 2025.
Final considerations
The information analyzed above allows us to state that the turn of the year had little effect on the country's inflation scenario, since the Transport and Food and Beverage groups continued to have a decisive impact on the behavior of the inflation index. In the first case, the impacts of changes in fuel prices were quite significant and will tend to persist in the coming months, since administered prices, especially for fuel and electricity, continue to trend upwards.
Some key prices in the Food and Beverage group, despite small negative fluctuations, continued to exert upward pressure. In this case, the high accumulated variations in the last month for ground coffee (50,35%), meat (20,61%), chicken (10,52%) and long-life milk (16,29%) stand out.
However, for some analysts, “the worst is over.” They justify this assertion based on the information that the country “will harvest a good soybean crop.” According to these analysts, this will cause the price to fall, also positively impacting the price of soybean oil, which will tend to fall due to there being more soybeans to crush. In addition, they believe that a greater supply of soybeans could reduce the price of animal feed and, therefore, stimulate greater meat production.
In this optimistic analysis, it seems that two relevant aspects are not being considered: on the one hand, it is worth remembering that soy is a commodity which has its price set on the international market (Chicago Stock Exchange) and that any expansion in demand, especially from China in the case of Brazil, could stimulate the direction of production to the external market, as has been done in recent years, implying less availability to meet the previously mentioned internal demands. On the other hand, one should not disregard the importance that the devalued exchange rate that persists currently could have on the fate of the “good soybean harvest”.
* Laura Mattei He is a professor at the Department of Economics and International Relations and at the postgraduate program in Business Administration, both at UFSC..
Note
[I]The groups considered are: Food and beverages; Housing; Household items; Clothing; Transportation; Health and personal care; Personal expenses; Education; Communication. These are subdivided into dozens of subgroups and hundreds of items and subitems.
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