The sector of the households living in Portugal is showing signs that some are already cutting back on food, but due to very high inflation, overall food expenditure is still soaring, rising by more than 13% in the third quarter, the largest deterioration in the National Institute of Statistics (INE) series, dating from the mid-1990s.
According to the new edition of INE’s National Accounts released yesterday, to which these data refer, the value spent on food (i.e. nominal value, at current prices, which has the driving effect of high inflation) reached also a new maximum in the official series, dating back to 1995.
Expenditure on food measured at constant prices (excluding the effect of inflation) reflects the evolution of the volume of food and this is declining.
The latter measure allows us to see the real evolution of food consumption and here the trend has been clearly negative for three quarters in a row, says INE.
It fell by 2.1% in the first quarter of this year compared to the same period in 2021, the decline worsened to 2.3% in the second quarter and continued the contraction by minus 1% in the third quarter.
Previously, the volume spent on food fell only with the troika
Real expenditure on food is an indicator that is highly correlated with acute crisis situations. In these INE series, this kind of household spending only really fell in the run-up times of the adjustment program of the troika and the PSD-CDS government, between the second quarter of 2011 and the first quarter of 2013.
In the current context of inflation, the volume may even fall, but the value will rise sharply anyway.
According to the INE, this amount of food expenditure by families living in the country rose violently shortly after the start of Russia’s war against Ukraine (it began in late February), with a historic increase of 8.5% in the second quarter. This record in the INE series was broken again in this third quarter, with an increase of 13.1%.
So there are accumulating signs that there are many households already consuming less food, perhaps already reflecting the impact of rising prices and the constraints placed on household budgets, especially for indebted households, which are also facing with another enormous pressure: the rapid and sharp rise in interest rates.
According to the highlights of the national accounts, private consumption is still holding up in real terms (excluding inflation), because, on the contrary, there are goods categories that are pushing up the total of total consumption (which represents two-thirds of the economy). .
“The durable goods component recorded more pronounced year-over-year growth, accelerating from 4.7% in the 2nd quarter to 14.7%, with an acceleration in both motor vehicle purchases and spending on other durable goods,” , explains the institute.
“However, this evolution partly reflected a base effect, as there was a 6.4% decline in Q3 2021,” reflecting “a significant reduction in spending on motor vehicle purchases.”
Sharp cooling of the economy
All in all, the Portuguese economy was still growing in the third quarter, but the slowdown is very pronounced. Real gross domestic product (GDP) rose 12% (year-on-year, excluding inflation) in the first quarter, slowing to 7.4% in the second and now stands at 4.9% in the third quarter.
This brings the average growth for the year (to September) to 8.1%, pointing to a very weak fourth quarter in light of the latest forecasts/estimates for growth in 2022, as this average should decline.
The government (Finance) estimates 6.5% in 2022, the Bank of Portugal and the OECD point to 6.7%, the European Commission (latest forecast) says 6.6%.
In the National Accounts publication, INE reports that “GDP, in real terms, registered a year-on-year change of 4.9% in the 3rd quarter of 2022 (7.4% in the previous quarter)”.
“The contribution of domestic demand to year-on-year GDP change declined in the 3rd quarter, from 4 percentage points (pp) in the 2nd quarter to 2.9 pp, with slightly less pronounced growth in private consumption and a decline in investment, determined by the behavior of changes in stocks”.
Total private consumption continued to grow by 4.4%, but investment fell by 0.4%, impacted by a write-down effect of equipment and materials in inventory.
Government consumption helped but little, slowing to just 0.5%, the weakest growth since the second quarter of 2020, when the pandemic began and the first major quarantine was declared.
Exports continue to do well, but are also losing momentum. The exported volume in goods increased by 11.3%, in services the increase was 30.1%. In total, sales abroad increased by 16.8% in the third quarter, a pace comparable to the increase of, for example, 25% in the second quarter of this year.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
