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IGP-M is a crucial economic indicator with a direct influence on the lives of Brazilians and potential implications for investments.
Understanding the meaning of IGPM is essential for individuals seeking to make prudent and secure investments, particularly during periods of high inflation.
IGP-M is less commonly utilized in investments compared to IPCA due to its higher volatility and sensitivity to the dollar. Consequently, it typically tracks the dollar’s movement, leading to its outperformance over IPCA.
Track all information about IGPM to understand its potential impact on your investments.
What does IGPM stand for?
IGPM is the General Market Price Index, which reflects the changes in market prices, indicating whether there was inflation or deflation in a specific period.
The IGP-M is a useful tool for measuring the value of your money. High inflation results in a general increase in market prices, leading to a decrease in consumer purchasing power.
The General Price Index – Market (IGP-M) concluded 2021 with a 17.78% inflation rate, as reported by the Getúlio Vargas Foundation (FGV). The chart displays the index’s historical data.
Learn the calculation process of IGP-M.
The IGP-M, calculated monthly by the Getúlio Vargas Foundation (FGV), tracks changes in goods prices before reaching the retail market. It provides monthly updates on average price fluctuations of goods sold, serving as economic growth indicators.
The general price index covers a broader spectrum of inflation in Brazil compared to the consumer price index.
The IGPM is constructed using three price indexes.
- Consumer Price Index for the Market – IPC-M
- IPA-M is an index that measures prices in the broad producer market.
- INCC-M stands for the National Index of the Cost of Construction in the Market.
Each index is assigned a weight based on different portions of gross domestic expenditure, which are calculated using the National Accounts. The weight distribution of the indices is as follows:
- 60 percent for IPA.
- IPC gets a 30% share.
- 10% is the rate for the INCC.
This weighting scheme aims to replicate the total value of each sector in the economy (attached, retail, and construction) as it was in the 1940s when it was implemented.
The IGP-M assesses price changes from the 21st of the prior month to the 20th of the current month, serving as a mid-month indicator by focusing on the final 10 days of the former period and the initial 20 days of the latter.
2022 IGPM Release Schedule
- January 28, 2022.
- February 25, 2022.
- March 30, 2022;
- April 28, 2022.
This inflation gauge is utilized for adjusting electricity supply agreements, as a reference for certain government-set prices, and as a benchmark in financial markets. Real estate funds also make payments tied to this index.
Differences between IPCA and IGP-M: What sets them apart?
Both IPCA and IGP-M are metrics that assess and reflect changes in prices of goods and services consumed by the population, although they have distinct characteristics that investors should grasp.
What does IPCA stand for?
The IPCA, known as the Consumer Price Index, is calculated on a monthly basis by the IBGE with the goal of showing price changes in the market for consumers.
The Central Bank relies on the IPCA as the official measure of inflation in the country, and the government uses it to check if the set inflation target is being achieved.
The two indices provide different perspectives on the economy, with IPCA focusing more narrowly and IGP-M encompassing a broader economic environment.
The IGP-M, calculated by the Getúlio Vargas Foundation, incorporates three additional indexes into its calculation.
- The IPC assesses the expenses of maintaining a household.
- The IPA tracks the prices of agribusiness products like soybeans, corn, and iron ore, as well as industrial goods such as processed foods.
- The INCC assesses only the real estate industry.
IPCA, unlike other measures of inflation, tracks the price changes of goods and services consumed by families with a specific income range. Data collection occurs throughout the month and is typically released around eight working days after the month ends.
The IPCA is computed by the IBGE in various metropolitan areas across Brazil, including Rio de Janeiro, Porto Alegre, Belo Horizonte, Recife, São Paulo, Belém, Fortaleza, Salvador, Curitiba, the Federal District, and Goiânia.
The IGP-M differs by taking into account price changes affecting both consumers and the entire production process. It tends to diverge from the IPCA when the real depreciates and the dollar strengthens significantly.
How does the IGPM impact investments?
Every investor needs to consider the IGPM when making investments, regardless of the duration.
When the price of items increases, the indicator rises, and conversely, when the price decreases, the indicator falls. This means that when there is an increase, the value of money decreases, affecting investments that are not safeguarded against currency devaluation, particularly long-term investments. This situation could jeopardize the profitability and assets of these investments.
When deciding where to invest your money, consider inflation and the IGPM. For instance, if an asset earns 12% but the IGPM or IPCA is 10%, the actual profit is only 2%. Focus on achieving a favorable real net yield.
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