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Broad Consumer Price Index – IPCA

ipca

The Broad Consumer Price Index (or IPCA, in Portuguese) is the official inflation index in Brazil. It’s calculated by the IBGE, the Brazilian National Institute for Statistics and Geography, since 1980 and it serves as a parameter for the inflation goals system of the Brazilian Central Bank (the local equivalent to the FED) since July, 1999.

The IPCA measures price variations in a number of products, such as foods and beverages in general, electricity fees, living articles, cleaning products, clothing items, white goods, transportation, health costs and several others. The basic research into those prices is conducted in a variety of POSs such as supermarkets, service providers and public service offices. As well, part of it is conducted in private homes, for purposes of rent and condominium fees verification. The significance of each of these divisions into the final calculations is detailed in the table below.

Significance of the diferente groups of products and services

Expenditure type

Significance of the expense % (Since January 1st, 2012)

Foods and beverages 23,12%
Transportation 20,54%
Living expenses 14,62%
Health and personal care 11,09%
Personal expenses 9,94%
Clothing items 6,67%
Communications 4,96%
Living articles and products 4,69%
Education 4,37%
Total: 100%

Source: http://www.portalbrasil.net

The IPCA covers families with an average monthly earnings between 1 and 40 times the minimum wage in the following regions:  Belem, Fortaleza, Recife, Salvador, Belo Horizonte, Rio de Janeiro, Sao Paulo, Curitiba, Porto Alegre, Brasilia e Goiania. The significance of each region in the final calculations is detailed in the table below:

Researched areas IPCA (%)
Belém 4,2
Fortaleza 3,9
Recife 4,1
Salvador 6,9
Belo Horizonte 10,8
Rio de Janeiro 13,7
São Paulo 33,1
Curitiba 7,4
Porto Alegre 8,9
Goiânia 3,7
Brasília 3,4

Source: IBGE

Prices are verified between the 1st and 30th day of each month, and it’s published approximately 8 days after the end of the verification. Prices obtained for each product are those actually paid by the consumer during the verification period, for non-installment payment plans. This means that potential hikes will be registered.

Money has value on time. Much that once you could buy with a certain amount of money today you can’t. And much that today you can buy, in the future will need more money to buy the same item. Therefore, you need to invest your Money ir order to not loose purchasing power. For this, there are some investments that guarantee at least the value of the IPCA, that is, guarantees a minimum income of inflation during the period of application. NTN-B of the National Treasury, for example, pays investors an annual fee plus the IPCA, protecting the investor money of inflation.

One variation of the IPCA is the IPCA-15, or the Broad Consumer Price Index – 15. The difference between the two is basically that the second one, or the IPCA-15 is calculated based on the 15 day of the previous month to the 15th day of the reference month. Therefore, in some cases, it serves as a preview to the final index.

To further check the history of the IPCA, one must simply visit the IBGE website or the PortalBrasil website:

http://www.ibge.gov.br/home/estatistica/indicadores/precos/inpc_ipca/defaultseriesHist.shtm

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

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