Portugal: Inflation Accelerated to 3.0% in May, Core Rate Slowed; Gdp Growth Up to 1.0% in Q1, but April Output Fell Sharply and Business Confidence Remains Low

Hilfe Daily Briefing › October 19, 2009

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Summary

Consumer price inflation rose to 3.0% in May as transport and food and beverage inflation continued to exert upward pressure. Core inflation remains much lower, down to 1.8% in May, but EU harmonised inflation at 2.9% remains above the Eurozone average of 2.5%. GDP grew by 1.0% year-on-year in Q1, the best rate since Q3 2004, even though domestic demand fell 0.1%, with the improvement coming from the external sector, where exports surged by 7.2% on the year while imports grew by only 3.0%. Despite the better Q1, business confidence as measured by the economic climate indicator fell to -0.5 in May from -0.4 in April, still very low. As for the supply side of the economy, industrial production declined sharply in April, down 5.6% on the month, and 1.7% on the year. A pattern of overall output falling but energy goods production rising has been seen since the end of 2005 and is symptomatic of the structural weaknesses in the economy and we expect this to continue over the short-run. The OECD has lowered its forecast for GDP growth in 2006 to 0.7%, down from 1.0% earlier, while predicting growth of 1.5% in 2007. The Socialist government plans to reduce the public work force by 75,000 as part of a wider effort to cut the budget deficit to 4.8% this year, but fierce opposition from the unions is likely to delay or even derail the process.

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Portugal: Inflation Accelerated to 3.0% in May, Core Rate Slowed; Gdp Growth Up to 1.0% in Q1, but April Output Fell Sharply and Business Confidence Remains Low

Inflation up to 3.0% in May from 2.9% in April

According to data released on 16 June by the National Statistics Institute (INE), consumer prices rose 0.5% in May, the same as in April, lifting year-on-year inflation to 3.0% from 2.9%. Average annual inflation, the government's benchmark, was up to 2.6% from 2.5% in April, while EU harmonised inflatio...

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