Portugal: Consumer Price Inflation Up to 3.1% in March; Government Meets Budget Deficit Target of 6.0%; Current Account Deficit Widens On Worsening Competitiveness

Summary

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Inflation rose to 3.1% in March, above 3% for the first time in almost three years, as clothing and footwear prices surged by 6.4% on the month. This came after a marginal improvement in economic activity, where the activity indicator recovered to its end of 2005 levels. The government managed to meet its target of a budget deficit of 6.0% of GDP in 2005 as the social security surplus was higher than expected. But it will be harder to achieve the official deficit projection of 4.6% of GDP this year as this assumes growth will reach 1.1% from just 0.3% in 2005. Meanwhile, industrial production weakened in February, falling 4.5% on the month and by 1.5% on the year. Following the pattern of recent months, consumer goods and investment goods production registered year-on-year declines, of 5.1% and 5.5% respectively. The current account deficit in the first two months of the year rose to EUR2.44bn from EUR2.20bn in the same period last year and shows no signs of abating. The worsening deficit has not only resulted from a higher imported energy bill but also from structural weakness in export industries, where high unit labour costs continue to act as a drag on performance.

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Portugal: Consumer Price Inflation Up to 3.1% in March; Government Meets Budget Deficit Target of 6.0%; Current Account Deficit Widens On Worsening Competitiveness

Inflation up to 3.1% in March from 2.8% in February

Consumer prices rose 0.5% on the month in March after a 0.2% rise in February, lifting annual inflation to 3.1%, the highest since September 2003. According to the National Statistics Institute (INE), the ...

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