Brazil IGP-M Price Index Rises at Slowest Pace in 15 Months

Brazilian wholesale, construction and consumer prices rose at the slowest annual pace in 15 months as the economy slowed and food prices slipped, reinforcing the view of policy makers that inflation has peaked.

The IGP-M price index climbed 0.53 percent, compared with a 0.65 percent increase in September, the Getulio Vargas Foundation said. The median estimate of 33 economists surveyed by Bloomberg was for prices to gain 0.55 percent in September. The IGP-M index rose 6.95 percent from a year ago, the slowest pace since July 2010.

“All of the data add to the sense that inflation has peaked,” said Neil Shearing, a London-based analyst for research firm Capital Economics Ltd. “The economy seems to have stagnated in the third quarter and there are tentative signs that domestic demand is slowing. People also often underplay the fact that food inflation shock can unwind very quickly.”

The central bank said yesterday that the world economy will slow enough to allow Brazil to make “moderate” interest rate cuts without stoking inflation. Bank President Alexandre Tombini cut the benchmark interest rate a half point for a second straight meeting last week, to 11.5 percent, to protect Brazil from turmoil in world markets. The bank, in the minutes to its Oct. 18-19 meeting, said that consumer price inflation peaked last quarter, and it sees “declining risks” of missing its 4.5 percent consumer inflation target in 2012.

Consumer prices, as measured by the IPCA-15 index, rose 7.12 percent in mid-October from a year earlier, down from 7.33 percent in mid-September, the first time the inflation rate had slowed in 14 months. The central bank said the inflation outlook had “accumulated favorable signs” since its August meeting.

Yields on interest-rate futures contracts to January 2013 rose 1 basis point, or 0.01 percentage point, to 10.4 percent at 7:19 a.m. New York time. The real gained 0.4 percent to 1.7030 a dollar from 1.7099 yesterday.

Brazil’s jobless rate was unchanged in September at 6 percent, the national statistics agency reported yesterday. Economists had forecast it would fall to 5.8 percent, according to the median estimate of 41 analysts surveyed by Bloomberg. Average real wages fell 1.8 percent from the previous month to 1607.60 reais ($926) a month, the report showed.

The economic activity index, a proxy for gross domestic product, contracted 0.53 percent in August from the month before, its biggest monthly drop since the global financial crisis of 2008. August retail sales fell the most since March 2009, while industrial production registered its third decline in five months.