Inflation rises to 2% in April 2017
In the first quarter of 2017, the Portuguese economy grew by 2.8% year-on-year, the highest growth rate since the fourth quarter of 2007. These developments were the result of a higher contribution of net external demand and higher investment. Also in the first quarter, the unemployment rate declined again, to 10.1%. In April, the Consumer Price Index increased to 2%, corresponding to an increase of 0.6 pp compared to the previous month.
The Gross Domestic Product grew by 2.8%, in year-on-year terms, in the first quarter of 2017. This corresponds to an increase of 0.8 pp compared to the previous quarter growth rate. According to INE – Statistics Portugal flash estimate, this evolution resulted from a larger contribution from net external demand, reflecting a higher increase in exports than imports. Domestic demand maintained a high positive contribution, with lower private consumption growth and higher investment.
The Consumer Price Index (CPI) rose to 2% in April 2017, 0.6 pp higher compared to the previous month, due to increased prices of restaurants, hotels and transportation systems. The underlying inflation indicator, CPI excluding unprocessed food products and energy products, had a year-on-year change of 1.7%. The Harmonized Index of Consumer Prices, which serves to compare prices between the different countries of the European Union, registered a year-on-year change of 2.4%. This is a higher value than the registered in the Euro Zone and the European Union of 1.9% and 2%, respectively.
According to INE – Statistics Portugal, the unemployment rate for the first quarter of 2017 stood at 10.1%, which corresponds to a reduction of 2.3 pp year-on-year. The unemployed population number was of 523 900 people, which means a reduction of 116 300 people compared to the same period of the previous year. The employment rate rose to 52.6%, reflecting a year-on-year increase in the employed population of 144 800 people.
The adjusted Labour Cost Index increased by 2.6% year-on-year in the first quarter of 2017. In the previous quarter, the year-on-year change was 0.6%. This is a result of increases of 3% in wage costs and 1.4% in other labour costs. The Monthly Coincident Indicator of Banco de Portugal (Portuguese Central Bank) for Economic Activity increased again in April, while the Indicator for Private Consumption stabilized. The OECD Index of Composite Indicators dropped again, reaching 2013 lows, presenting the value of 99.91. This sets itself for the second consecutive month to a figure below 100, which may indicate a slowdown in economic activity in the next six to nine months.
The rating agency Moody’s has released the economic outlook for Portugal, where it forecasts a GDP growth of 1.7% this year and 1.4% in 2018. Moody’s also predicts that the budget deficit will be 2% in 2018 and that the public debt is on a downward trajectory and will reach approximately 125% of GDP in 2020.
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