Deflation Besets Scandal-Plagued Brazil for First Time in 11 Years

In mid-May, the Bovespa Index plunged about 10% as a political scandal involving Brazil’s president erupted. In our opinion, the news event accelerated a downtrend that was already underway. The Bovespa Index in fact topped in late February, trading sideways since then.

And, now South America's largest nation has logged deflation for the first time in 11 years.

Here's an article excerpt from The Rio Times (July 10):

The National Consumer Price Index (IPCA) in Brazil registered a deflation of 0.23 percent in June, according to the IBGE (Brazilian Statistics Bureau). This is the first negative result registered in eleven years and the lowest for the month since the beginning of the Real Plan economic plan, in 1994.
"The three most important groups for the domestic household budget have fallen, affecting the main expenses of the population: food, housing and transportation," said IBGE's price index coordinator, noting the decline in electricity and transportation tariffs as well as food.
IBGE data showed that electric bills, which in May increased by 8.98 percent fell in June by 5.52 percent. The entity also highlighted the fact that fuel prices fell by 2.84 percent during the month, causing the transport group to close down by 0.52 percent.
The food and beverage segment, which represents 26 percent of the IPCA index fell by 0.5 percent. "This decline in prices reflects the positive results of the harvest and the effects of the reduction in the purchasing power of the population, which led retailers to offer sales and promotions."
As a result, inflation for the first six months of the year closed at 1.18 percent, much lower than the 4.42 percent registered in the first half of 2016.

You can read the entire article by following the link below: