Brazil’s Consumber Price Inflation (CPI) number came out the end of last week and for November 2010 the reading was +0.83%, which added to the annual figure now standing at 5.63%. MercoPress (a news agency that’s getting bigger and better these days…watch out Reuters) has the English language rundown on the issue, noting that November’s monthly number was the “highest monthly level in five years”.
So, is this a problem brewing for Brazil? Well, let’s start with some context and a monthly CPI chart that goes back to January 2007, courtesy of the official Brazil beancounters IBGE:
So the 0.83% number is the “highest in five years”, but it’s also one of seven months since 2007 that has seen a spike. Those spikes tend to come in pairs, too. Next up, 5.63% may sound a lot (or it may not if you live in Caracas) but in Brazilian terms it’s pretty low. what’s more important is that Brazilians, the population at large, know how to handle price inflation as it’s an issue they’ve lived with for a long time. For example, 5.63% annual fades into nothingness compared to the average of 30% inflation a month that Brazil suffered in 1993 (to pick just one hyperinflation year out the bag).
So inflation in Brazil isn’t an issue…yet. When Dilma Rousseff kicks off her Presidency on Jan 1st 2011 it may become a worry or it may not, but your author would want to see three or four consecutive months over 0.8% before changing his mind.