Brazil’s Consumer Price Index to be released today
Brazil’s revised Consumer Price Index, a statistic generally indicative of inflationary trends, will today be released.
The current Brazilian inflation rate stands at 2.4% after the country’s most aggressively deflationary month in the last 26 years. Five of nine industries recently surveyed by the Brazilian Institute of Geography and Statistics (IBGE) recorded outright deflation in May, with transport and fuel prices struck particularly hard.
Inflation projections for 2020 have deteriorated for a 13th consecutive week to 1.53%—well below the central bank’s target of 4%—aligning with expectations for a marked economic contraction. This consistent decline is reflective of a strained Latin American region that has suffered substantial downgrades in global risk rankings since the onset of COVID-19, with additional downgrades likely.
Expect the dire economic situation to boost Brazilian dependence on exports to China, which seeks to establish Brazil as an alternative agricultural and energy supplier to the US; China absorbed 54% of Brazil’s outbound shipments in May. The poor inflationary outlook has amplified the risk of further interest rate manipulation, while the twin risks of sovereign default and surging domestic outbreaks will likewise constrain recovery efforts in the coming months. Expect the pandemic’s deflationary pressure to solidify Latin American dependence on FDI and commodity exports in the long-term.
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