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General Market Price Index

igpm

The General Market Price Index (or IGP-M, in Portuguese) is calculated by the Fundação Getulio Vargas (one of the most respected higher education institutions in Brazil) since late 1940 and has, as a main objective, measuring price fluctuations. In Brazil, its averages are mainly used as a basis for rente contract corrections and to help index some electrical fees.

It researches a number of economy sectors throughout the entire country, among them industry, construction, agriculture, consumer direct sales and consumer services. It encloses all variations from the 21st day of one month until the 20th day of the following month, and it’s published on the last day of the final month.

The index has three main purposes:

1. It’s a macroeconomic indicator, representing the evolution of the price levels of productive activities, asides from operations in the wholesale, retail and construction markets.

2. It’s a deflating agent for face values of tax proceeds and the mid-consumption of the country’s accounts.

3. It’s used as a basis to correct prices and contract values for rent and electricity fees.

The IGP-M is the weighted average of the following three price indexes:

1. Wholesale Price Index (IPA, in Portuguese)

Its significance corresponds to 60% of the IGP-M. The IPA registers price variations for agriculture and industry in the wholesale market – business to business, before the chain reaches the end consumer. It’s a production level price index.

2. Consumer Price Index (IPC, in Portuguese)

The significance of the IPC corresponds to 30% of the IGP-M. This index measures the price variations of a set of goods and services that compose the basic family expenditures for families earning between 1 and 33 times the minimum wage: like foods, drinks, living expenses, health care, education, entertainment, transportation and so on. Prices are checked in Sao Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Recife, Porto Alegre and Brasilia.

3. Construction Price Index (INCC, in Portuguese)

The significance of this index corresponds to 10% of the IGP-M. The INCC follows the price evolution of construction supplies and services, including wages. Currently, prices for these items are checked in Sao Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Recife, Porto Alegre and Brasilia.

Some investments are corrected by the IGP-M, such as most real estate investments. For those lacking the required minimum for this type of investment, the best advice is looking for real estate funds, considering most rent contracts are corrected by this index.

To further check the history of the IGP-M, one must simply access the PortalBrasil website:

http://www.portalbrasil.net/igpm.htm

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