Rising prices of food parcels in Brazilian capitals in 2022: generated by the demand for higher average incomes from its employees?

By Daniel Christian Henrique and Lucas Ferreira Mazagão 

Previously, the GPFA had initiated a study on the dependent relationship between the prices of food parcel in Brazilian capitals and the average income of their workers, addressing its causality over time and its consequent temporal lag through the use of autoregressive vectors ( SEE RESULTS BY CLICKING HERE ). 

This report maintains the continuity and update of this study, but now addresses cross data section only for 2022 and consequently without analysis of delays in impacts. The prices for basic food baskets were obtained from Dieese (Inter-Union Department of Statistics and Economic Studies), while the values of people's real average monthly income (over 14 years old) were obtained from IBGE (Brazilian Institute of Economics and Statistics). It is worth noting that this variable does not include income from social programs such as Auxílio Brasil, Bolsa Família, BPC-LOAS, retirement or pension from the Social Security Health Plan (or pension plans), unemployment insurance, alimony, donations, grants study, receiving rent or any income from financial investments. To configure this analysis specifically for the year 2022, the methodology chosen was simple regression , validated by testing its coefficients, equation (F) and normality of residuals. 

It is worth highlighting some points that contextualize the situation of workers' income and food parcel prices in that year of study, both widely publicized in the economic-financial media as well as by research and statistics departments, making this analysis pertinent: 

1. Health flexibilities made strong progress in 2022, enabling the resumption of activities in several sectors that were stagnant in 2021, mainly services, increasing employability and consequently increasing the number of employees with disposable income (GPFA b; GPFA c ). 
2. Although the worker's average income fell by 7% between 2021 and 2022, the sum of all workers' income in 2022 reached R$261.3 billion, representing an increase of 6.9% in relation to 2021, breaking the record for historical series due to the increase in the employed population (Agência Brasil). 
3. The real average income of Brazilian workers in 2022 was R$2,500, while the real average income of workers in the capitals was R$3,290.00, around 34 % higher (IBGE). 
4. In 2022, the prices of food parcel rose in all capitals of the federation caused by demand and supply factors (Dieese, GPFA c ) 
5. Inflation control is the central point of current economic debates, in which a balance is sought between the heating and cooling of the economy within an equilibrium point in which inflationary control is not lost , but also allows people to obtain income to meet their needs - but without generating excessive demand in some key sectors (consequently not raising prices and inflation). In this context, the prices of food parcel become a crucial point of analysis in inflationary controls by governments (but of course, not only this). 
6. In the inflationary context, it is important to highlight that in 2022 there was an increase in the price of gasoline , reaching an average of R$7.39 per liter, according to the ANP (National Petroleum Agency), a factor that influences the fuel supply chain. products (including the components in the food parcel). 
7. In 2022, the dollar closed at R$5.28 , still influenced by the crisis caused by the pandemic, so that the retention of agricultural products in Brazilian territory became more expensive, contributing to the increase in prices ( InfoMoney ). And, consequently, also an increase in the prices of basic food products. 
8. The food parcel contains the following products: Meat, milk, beans, rice, flour, potatoes, tomatoes, French bread, coffee powder, bananas, sugar, lard/oil and butter (DIEESE). In this way, any change in the production structure of the mentioned foods changes the general price of the food parcel.

Contextualizing the supply and demand situation involving the prices of food parcels, it is pertinent to ask: the fact that the real average salaries of workers in the capitals are 34% higher than those of other employees in Brazil in 2022 would have generated excessive demand, becoming the main element of the increase in the prices of food parcels in the capitals during the period?

Results 

Once the context was understood, the proposed causal relationship between the variables was: X = average real income of workers in capitals (IBGE) Y = price of basic food baskets in capitals (DIEESE) To find the best relationship, the following regressions were tested : linear, exponential, logarithmic, polynomial and power . The results were relatively similar, using the model with the lowest error as the winner: 

 _{EAM: Mean Absolute Error; NDE: Mean Squared Error; EPAM: Average Absolute Percentage Error} 

In the results obtained, there was a better fit with lower errors for the linear model, another for the polynomial and a tie between both in the Average Absolute Percentage Error (EPAM). Therefore, the linear technique was approached, given the possibility of analyzing the normality of its residues without major problems. Graph, predictive equation, coefficient tests, F test and normality results in sequence:

The predictive equation obtained approval for its coefficients , as well as the validity of its equation due to its F value, followed by an R ² with 66.12% explanatory capacity. Its residuals were normal after passing the Chi -square test, surpassing the 5% significance level and reaching 28.19%.

Conclusions 

Due to the fact that the average real income of residents in the capitals is 34% higher than that of salaried workers (IBGE) throughout Brazil, it was pertinent to ask: would such an increase have an excessive impact on the price increases for food parcels in the capitals resulting from a possible greater demand? In this study, it was found that in 2022, a simulation of an increase of R$ 100.00 in the average real income of Brazilians residing in the capitals through the linear regression equation obtained, would cause an increase in food parcel in the capitals of only R$ 7.46. 

Therefore, in 2022, the increases in the real average earnings of workers in the capitals generated some increase in demand and consequently were also related to the increases in the prices of basic food baskets in these cities. However, given the significant increases in the value of their baskets in that year, it was a smaller demand factor compared to others of micro and macroeconomic origin, as it impacted an increase of just R$7.46 in the prices of the food parcel. 

São Paulo as a reference , for example, Dieese's December 2022 report points out that the price of a food parcel in the capital went from an average value of R$654.70 in 2021 to R$762.23. Therefore, an increase of R$107.53. According to this study carried out here, a supposed increase of R$ 100.00 in the average income of its salaried workers would only cause an increase of R$ 7.50 in the prices of baskets, leaving the other R$ 100.00 of the increase to be explained - relating to the other variables that were not included in this study. 

Other main reasons for the increases in baskets above inflation, according to notes available in the same report, on the demand side were: lack of storage policies , subsidies and incentives for family farming . In the opposite direction, the most cited factors related to supply to increase basket prices were: war between Russia and Ukraine , increasing the cost of wheat and sunflower oil, increasing the cost of milk production in the countryside, increasing fertilizer prices , dry weather and high exchange rates - favoring exports. 

Having reached the conclusions, it is worth highlighting again that analyzes of demand in the various key sectors of the economy require analysis and are necessary for an adequate understanding of inflationary behavior. 

References: ANP , IBGE , Dieese (a) , Dieese (b) , Agência Brasil , Infomoney , GPFA (a) , GPFA (b) , GPFA (c) 

How to cite this newsletter? (ABNT standard)

HENRIQUE, Daniel Christian; MAZAGÃO, Lucas Ferreira. Elevação dos preços das cestas básicas nas capitais brasileiras em 2022: gerada pela demanda dos maiores rendimentos médios de seus assalariados? 2023. Desenvolvido por GPFA - Grupo de Pesquisa em Finanças Analíticas. Disponível em: https://www.gpfa.com.br/informes/alta-precos-cestas-basicas-capitais. Acesso em: (data de seu acesso ao site).