Brazil IGP-M March inflation slows but consumer prices quicken

Wed Mar 27, 2013 8:30am EDT

Related Topics

* Brazil's broadest inflation measure eases to 0.21 pct in March

* Annual inflation edges down to 8.06 pct

* Wholesale prices unchanged, but consumer prices soar

SAO PAULO, March 27 (Reuters) - The broadest measure of Brazilian inflation slowed more than expected in March but its consumer price component accelerated its advance, the private think tank Fundação Getulio Vargas said on Wednesday.

The IGP-M index -- which encompasses wholesale, construction costs and consumer prices -- rose 0.21 percent in March, easing its pace of advance from a 0.29 percent gain in February.

The index had been expected to rise 0.31 percent, according to the median forecast of 24 economists polled by Reuters.

The consumer price component, which has a 30 percent weighting in the index, rose 0.72 percent, compared with a 0.30 percent increase in February.

That suggested the possibility that benchmark IPCA consumer index inflation could break the central bank's target ceiling this month and put more pressure on the central bank to raise interest rates soon. The government's statistics agency is due to release the IPCA for March on April 10.

Analysts and investors closely monitor the IGP-M because it provides a broad look at both wholesale and consumer prices in Latin America's largest economy. It also allows investors to watch price trends in the construction industry.

In the 12 months through March, the IGP-M index rose 8.06 percent, down from 8.29 percent in the previous month.

The wholesale component of the IGP-M, which accounts for about 60 percent of the overall index, rose just 0.01 percent in March, compared with an increase of 0.21 percent in the previous month. Intermediate goods such as industrial supplies, which are inputs for factories, dropped 0.28 percent, from a rise of 0.73 percent in February.

The construction costs index, which accounts for the rest of the IGP-M, climbed 0.28 percent in March after a rise of 0.80 percent in the previous month.

The central bank targets IPCA annual inflation at 4.5 percent, plus or minus two percentage points.

With the prospect of the IPCA index piercing the target inflation ceiling of 6.5 percent in coming months, most economists and investors expect the bank led by Alexandre Tombini to start raising interest rates in May from the current record low of 7.25 percent.

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