Institute links sharper inflationary impact on lowest income brackets to steeper increases in food prices, electricity
11/13/2024
October inflation rose for nearly all income levels in Brazil, with lower-income households seeing the highest increases, according to the Applied Economic Research Institute (IPEA). Only households with incomes above R$21,059.92 saw a slight deceleration. For very low-income households—earning less than R$2,105.99 per month—inflation climbed from 0.58% in September to 0.75% in October. Meanwhile, inflation rose from 0.55% to 0.71% for low-income households—those earning between R$2,105.99 and R$3,158.99.
The IPEA’s Income-Based Inflation Indicator, drawing on the Extended Consumer Price Index (IPCA) data from the Brazilian Institute of Geography and Statistics (IBGE), tracks inflation trends across income levels by total household income. The IPCA, Brazil’s benchmark inflation index, increased from 0.44% in September to 0.56% in October.
For households with middle-lower incomes (R$3,158.99 to R$5,264.98), inflation climbed from 0.48% in September to 0.61% in October. Middle-income households (R$5,264.98 to R$10,529.96) experienced an increase from 0.39% to 0.54%. Meanwhile, for middle-upper-income households (R$10,529.96 to R$21,059.92), inflation rose from 0.31% to 0.49%. Households earning over R$21,059.92, the only group to experience a slight deceleration, saw inflation ease to 0.27% in October from 0.33% in September.
The IPEA attributed the sharper inflationary impact on lower-income households to the steeper increases in food prices (up 1.06% according to the IPCA) and electricity costs (a 4.74% increase). Conversely, deflation in airline fares (-11.5%) and fuel (-0.17%) provided some relief for higher-income households.
“In October, although the food and beverage and housing categories were primary inflationary pressures across all income levels, the impact from these segments was proportionally stronger for lower-income households, given the larger share of their budgets allocated to these essentials,” said Maria Andreia Parente Lameiras, author of the study.
Higher inflation rates for low-income households have not been limited to October. Over the 12 months ending in October, the very low-income segment saw the highest inflation rate at 4.99%, while high-income households experienced the lowest rate at 4.44%. The average IPCA rate over the period was 4.76%, exceeding the Central Bank’s inflation target ceiling of 4.5%.
Year-to-date in 2024, low-income households have faced an inflation rate of 4.17%, compared to a lower rate of 3.2% for high-income households. By comparison, the IPCA rate over the same period stands at 3.88%.
*By Lucianne Carneiro — Rio de Janeiro
Source: Valor International