BUYSIDEBRAZIL | INFLATION IPCA-15 (Aug/25)

IPCA-15
 The IPCA-15 for August recorded a decline of 0.14% m/m, above the median expectations (BBG: -0.20%; Broadcast: -0.21%; BSB Survey: -0.23%) and also above our projection (-0.22%). Over 12 months, the total index rose by 4.95%.

 The average of core indices was +0.31% m/m (Buysidebrazil 0.24%; AE: 0.23%; BSB Survey: 0.25%), above both our expectations and the market’s. This was mainly explained by upside surprises in underlying services items.

 The main surprises compared to our estimates came from Household Electricity (-4.93% m/m; +7bps), Education (0.78% m/m; +3bps), and Personal Expenses, partially offset by Household Food (-1.02% m/m; -5bps).

Services (0.50%; +7bps): This group had the largest surprise in this release. Among non-core items, the main surprises were Airfares (-2.59% m/m; +2bps), Accommodation (2.00% m/m; +1bp), and Regular Courses (0.80% m/m; +2bps), the latter above July’s IPC-Fipe.

 Underlying Services (0.55% m/m; +2bp): Widespread upside surprises, especially in personal expenses, highlighting Hairdressing and Barber (+1.21% m/m; +1bp). Other items with smaller surprises included Voluntary Vehicle Insurance (0.54% m/m) and Club Memberships (3.04% m/m).

 Industrials (0.00% m/m; -1bp): Mixed surprises this time. Downside surprises in Electronics (-0.56% m/m; -1bp), New Cars (-1.32% m/m; -1bp), Used Cars (-0.30% m/m; -1bp), and Personal Hygiene (1.07% m/m; -1bp). Clothing (0.17% m/m; +3bps) partially offset the downside, suggesting that July’s larger decline may have been influenced by temporary promotions like Prime Day.

 Household Food (-1.02% m/m; -5bps): Generalized downside surprises, with highlights for Meats (-0.94% m/m; -2bps), Processed Meats and Fish (-0.65% m/m; -1bp), Tubers, Roots, and Vegetables (-9.38% m/m; -1bp), and Cereals, Legumes, and Oilseeds (-2.81% m/m; -1bp). The wide dispersion of downside surprises indicates consistent deceleration in food prices, including processed meats and fish.

 Administered Prices (-0.61% m/m; +8bps): The main surprise was likely the smaller-than-expected effect of the Itaipu bonus tariff on residential electricity (-4.93% m/m; +7bps), partially offset by a stronger-than-expected decline in Gasoline (-1.14% m/m; -3bps), probably influenced by delayed pass-through from Petrobras price cuts in early June and the downside pressure from Ethanol (-1.98% m/m; -1bp).

 Overall, in terms of number quality, the IPCA-15 (Aug) came worse than expected by us and the market; however, the upside surprise in Underlying Services and Core Average was not enough to generate a re-acceleration over the 12-month cumulative measures.