UPDATE 1-Brazil's inflation slows sharply in July

viernes 8 de agosto de 2014 09:27 GYT
 

(Adds market reaction, details on airfares and food prices)
    By Silvio Cascione
    BRASILIA, Aug 8 (Reuters) - Consumer prices in Brazil barely
rose in July, government data showed on Friday, in surprisingly
good news for President Dilma Rousseff as she seeks to reassure
voters that inflation remains under control ahead of October's
election.
    Prices as measured by the benchmark IPCA index rose just
0.01 percent from June, the slowest monthly inflation rate in
four years and below all forecasts in a Reuters poll.
     As a result, the annual inflation rate slowed slightly to
6.50 percent in July from 6.52 percent in June,
remaining at the upper limit of the official target range. The
central bank targets inflation at 4.5 percent, with a tolerance
margin of 2 percentage points.
    The numbers suggested the central bank's yearlong series of
increases in interest rates, which ended in April at 11 percent
, might have started to curb rising prices.
    Inflation, which has remained stubbornly high since Rousseff
took office in 2011, is a major theme in Brazil's presidential
race. Rousseff's main challenger, Aecio Neves, has narrowed her
lead in recent weeks, according to polls. 
    High prices have also dented business and consumer
confidence, contributing to a sharp economic slowdown that some
economists say may lead to a recession this year.
    Lower airfares, food and fuel prices contributed the most to
tamping down July's inflation, according to statistics agency
IBGE.
    Airfares plunged 27 percent after the soccer World Cup,
while food prices fell 0.15 percent, the fourth straight month
of decline. Gasoline prices declined 0.80 percent.
    The share of goods and services whose prices increased from
June, the so-called diffusion index, dropped to 59 percent from
61 percent, according to calculations by Banco Fator, suggesting
weaker price pressures. The average of the main core inflation
measures also fell to 0.25 percent from 0.61 percent.
    The median forecast of 31 economists surveyed by Reuters for
the July inflation rate was for an increase of 0.10 percent. The
lowest forecast in the poll was 0.05 percent. 
    Below is the result for each price category:
    
                                     July        June
 - Food and beverages               -0.15       -0.11
 - Housing                           1.20        0.55
 - Household articles                0.86        0.38
 - Apparel                          -0.24        0.49
 - Transport                        -0.98        0.37
 - Health and personal care          0.50        0.60
 - Personal expenses                 0.12        1.57
 - Education                         0.04        0.02
 - Communication                    -0.79       -0.02
                                                     
 - IPCA                              0.01        0.40
 
 (Additional reporting by Rodrigo Viga Gaier and Felipe Pontes
in Rio de Janeiro; Editing by Lisa Von Ahn)