Why have food products caused the June 2018 Consumer Price Index increase to be the largest since 1995?

By José Ronaldo de Castro S. Júnior, Ana Cecília Kreter and Jefferson Staduto

On July 6th, the Brazilian Institute of Geography and Statistics (IBGE) published the Broad National Consumer Price Index (IPCA) for the month of June. The agricultural sector, which has recently been contributing greatly to the stability of the IPCA, ended up being one of those responsible for its largest monthly increase since 1995.

In fact, this sector has been playing an increasingly strategic role in the Brazilian economy. Given its critical contribution both to the internal demand for food and raw materials and in terms of the Trade Balance, the sector has had a significant impact on international trade and on the level of economic activity, and is most likely to continue to do so in future. There is also a direct relation between the price of agricultural products and inflation. The “food and beverages” group is responsible for the largest portion (24.27%) of the IPCA. Within this group, “household food items” account for 15.61% of the total IPCA.

The purpose of this technical note is to examine the behavior of the price of the agricultural products that make up the “food and beverages” group and to propose some reasons why these products had such a large impact on the IPCA last June.

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