The so-called factory-gate inflation in the country, without taxes and freight, hit a record for the second consecutive year. This is what the Brazilian Institute of Geography and Statistics (IBGE) reported yesterday when announcing the Producer Price Index (IPP), the official indicator that measures price evolution in this segment.
According to the institute, the IPP fell 0.12% in December, down from 1.46% in November, favored by price drops in the mineral extraction industry, especially iron ore, in that month. However, the negative rate in the monthly evolution was not enough to prevent a record high of 28.39% in the annual IPP for 2021 – the most intense in the historical series that began in 2014, and well above 2020 (19.40%).
Several factors led to the result, according to the manager of analysis and methodology of the IBGE’s Coordination of Industry, Alexandre Brandão. Besides the appreciated dollar, he recalled, which makes imported inputs for production more expensive, raw materials commodities also became more expensive in 2021 due to a higher demand than supply. This was the case of iron ore, crude oil, chemicals, and food. All those factors in a pandemic scenario led to the disorganization of the industry’s global input chain, not yet completely fixed, observed the specialist.
When questioned about the possibility of a continued high in the indicator this year, the manager recalled that the IBGE does not make forecasts. However, he admitted that most of the reasons that led to the record high IPP in 2021 were not completely resolved at the beginning of this year. “The environment hasn’t changed much from the end of the year to here,” he acknowledged. “But we have to wait and see what will happen [with the IPP].”
When talking about the trajectory of the indicator, Mr. Brandão recalled that the IPP for the industry is formed by two indices: the transformation industry and the extractive industry. The transformation industry inflation rate was 0.63% in December, compared to 1.89% in November, while the IPP for the extractive industry was down 12.77% in December, after a retreat of 5.21% in November.
With the December performances, the factory-gate inflation for the transformation industry closed in 2021 with an increase of 29.24%, compared to a high of 18.18% in 2020. The IPP for the extractive industry, on the other hand, rose 13.83% in 2021. In 2020, the increase in the extractive industry was 45.35%.
Although both the extractive and transformation industries have contributed to the increase of the IPP in 2021, the latter had a larger impact in the formation of the spike of prices calculated by the indicator, said Mr. Brandão. He informed that the annual factory-gate inflation of the transformation industry also hit a record last year. “The prices of the transformation industry represent around 95.12% of the total indicator,” he recalled, adding that the strong weight, along with expressive high, drove the record IPP.
Among the segments that rose the most in price last year, the specialist cited oil refining and biofuels. “This segment had a price rise of 69.72% last year,” he added. The specialist commented that the area was strongly influenced by upward fluctuations in the price of a barrel of oil – which makes related derivatives more expensive, the analyst pointed out.
In practice, noted the specialist, it was not most segments, but those of greatest weight in the calculation of the IPP, which had a significant increase last year. In 2021, eight out of 24 activities of the extractive and transformation industries closed higher than the previous year. Besides oil refining, other highlights cited by Mr. Brandão were the price increases last year in food products (29.24%), other chemicals (64.09%), and metallurgy (41.79%). “The increases in these four [segments] explain most of the rise in the year [of the IPP],” he summarized.
Source: Valor International