In September and October last year we witnessed something unexpected. After many months of confinement, with rather strict measures, better health numbers allowed the economy to slowly open up, which lifted consumers' spirits. In addition, after an unforgettable episode in Congress, with characters performing pitiful spectacles such as running like an anime character, the first withdrawal of pension funds had been approved. These had begun to be paid in August and, according to figures from the Superintendency of Pensions, would exceed US$2,000 million. So far, so normal. But September arrived, and with better spirits, national holidays and money in our pockets, consumption began to rise. From sneakers to computers, cell phones to paprika, sales of these products increased surprisingly.

The problem is that companies, for the most part, had not prepared for such a situation. In fact, since the beginning of 2019, imports of consumer goods were showing negative rates of change, with international trade quite weakened as a result of the trade war between the U.S. and China (my God what a flashback, it seems like a lifetime ago). The social outbreak in October and the pandemic only exacerbated this situation, which reached its peak in May 2020, with a year-on-year drop of almost 45%.

Therefore, when the demand for products increased surprisingly, the warehouses were not prepared. And what happens in this type of cases, despite the fact that some people believe that a couple of laws are enough to repress it, happened: the market acted. Thus, we observed significant increases in several products, which caused the CPIs for September and October to show significant increases, beyond all consensus estimates and those made by the Central Bank itself a few weeks before.

Now, with more liquidity on the street than at that time, with three withdrawals of social security funds and direct transfers from the State to a majority of the population, it is logical to fear a similar situation. This was already indicated by the Central Bank in the recent IPoM, in which it increased the inflation projection for the current year to 4.4%, and even led it to suggest that the process of monetary normalization could begin sooner rather than later.

However, there is a situation that is different. Since the second half of 2020, the trend in imports began to reverse. In value, in June, imports of consumer goods increased 105% over the previous year, with those of durable goods growing 207%, while non-durable goods "only" increased 75%. Just to name a few, clothing and footwear increased 106%, computers and other electronic equipment 77% and new automobiles by... 456%!

Has this been the reason for not seeing an inflationary spiral recently? It is probably helping to contain pressures, but I would not rule it out completely. Recall that these are aggregate data and the products within a category are not necessarily homogeneous. In addition, the IFE payments started only recently and their effects may be taking time to become evident in prices. But one thing is clear: inventories matter.