June 4, 2023

Excellent news for Brazilians who rent

Brazilians who pay rent pay attention to the news about real estate rental prices. General Price Index – Market (IGP-M) , It is considered Rent inflationAnd He fell 0.95% in April, after being practically stable in the previous month.

In short, the last months of 2022 have already shown a slowdown in IGP-M, with rent inflation showing very modest differences. At the beginning of this year, prices in the sector continued to slow down, until they fell back in April.

Namely, the indicator is popularly known as rent inflation. Incidentally, the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV Ibre), in charge of the survey, released the data last Thursday (27).

The index acts as an index for contracts, including real estate leases. but, The IGP-M is not limited to rentalsalso affect general tariff and insurance contracts, for example.

In addition, it affects school and university fees, electricity prices, and health plans. In other words, IGP-M is very important for different segments of society, directly affecting them.

With the addition of the April result, the index has begun to accumulate a decline of 0.75% in 2023 and 2.17% in the past 12 months. This means property rental prices are cheaper this year, compared to 2022. In fact, IGP-M has accumulated a solid 14.66% increase in the past 12 months through April 2022.

In sum, this is the first time since February 2018 that a 12-month cumulative IGP-M has been negative. In fact, the annual percentage recorded in April 2023 is The youngest of the entire historical seriesIt started in the late eighties.

IGP-M covers three indications

In short, the IGP-M difference is due to three indicators:

  • broad producer price index (IPA);
  • consumer price index (CPI);
  • National Construction Cost Index (INCC).

In April, two of the indicators slowed down compared to March. Thus, they pulled down the IGP-M, which moved from a positive domain to a negative domain. The only exception was INCC, whose pricing accelerated slightly.

President Lula and current Finance Minister Fernando Haddad. Photo: Ricardo Stockert

Despite the slowdown recorded by IPA and IPC, the former was only in a negative field. IPC and INCC had positive rates, that is, prices increased compared to March, putting pressure on the pockets of consumers in the country.

Consumer prices continue to fall

In summary, IPA exerts the greatest effect on IGP-M. For this reason, the indicator that considers rent inflation tends to present similar variations to the IPA.

In the fourth month of 2023, the index decreased by 1.45%, compared to a decrease of 0.12% in March. The raw materials phase slipped 3.20% in April, after a 0.71% variance in March, which strongly affected IPA and pulled it into the negative territory.

Prices of important commodities for the productive sector continue to fall. Soybeans (-9.34%), corn (-4.33%) and iron ore (-4.41%) open space to ease cost pressure in important retail sectors, with these impacts favoring consumer prices.said Andre Braz, coordinator of price indices.

In case CPIThe rate increased by 0.46% in April, after rising by 0.66% in the previous month. The rate was slowed by declines in three of the eight expense categories surveyed by FGV Ibre.

In short, the slowdown came from the transportation (2.22% to 0.85%), housing (0.84% ​​to 0.62%), and communications (0.46% to 0.21%) groups. Decreases were mainly caused by the respective items: gasoline (6.52% to 2.39%), residential rent (2.73% to 1.31%) and mobile phone tariffs (1.18% to 0.55%).

On the other hand, the groups of education, reading and leisure (-1.50% to -0.96%), food (0.14% to 0.36%), clothing (0.20% to 0.31%), miscellaneous expenses (0.13% to 0.18%) and health and care increased. Personal (1.00% to 1.01%) of their rates, but did not prevent a slowdown in April CPI.

The main impacts came from airline tickets (-8.21% to -5.59%), vegetables (-2.75% to -0.68%), shoes (-0.01% to 0.73%), mail (0.37% to 2.08%), and medicines in general. (0.21% to 2.02%), respectively.

Construction inflation accelerated

The third indicator that makes up the IGP-M accelerated in April, slightly limiting the decline in rent inflation. Which INCC It accelerated from 0.18% in March to 0.23% in April.

In short, the decline in the index is the third in the past four months. However, the differences were so slight that they should not be felt by consumers.

The index result in April was driven by changes in one of INCC’s three component groups, though declines in the other two. The fluctuations were as follows: materials and equipment (-0.07% to 0.14%), services (0.88% to 0.65%) and labor (0.27% to 0.23%).

This data shows that rent inflation fell in April, despite a marked increase in building and consumer prices. This happened because the IPA became more negative and the IGP-M was withdrawn a month later.