The increase in consumer prices between March 2022 (when the war started) and the same month of this year amounted to 7.4%, confirmed yesterday (Thursday) the National Institute of Statistics (INE), which had already advanced the value in a preliminary estimate at the end of last month.
However, the eurozone average is falling faster and as a result the Portuguese average, which has been above the European average since November, has moved even further over the past month.
Since the start of the crisis, Portuguese inflation has not moved that far (up) from the average of the single currency, according to calculations by Dinheiro Vivo based on Eurostat data (opens in PDF).
As mentioned, the inflation crisis started about a year ago. In Portugal, the harmonized price increase (the measure that allows international comparisons) was even further off the European pace.
In Portugal, harmonized inflation stood at 8% in March (8.6% in February). It fell more sharply in the Eurozone, falling to 6.9% in March (8.5% in February).
This means that the European Central Bank’s (ECB) policy of strong and rapid rate hikes appears to be able to contain inflation in the eurozone (it peaked at 10.6% in October, five times ahead of the 2% target of the ECB).
But at the same time, this policy is apparently less effective in bringing Portuguese prices down. In Portugal, there are signs that inflation could be more anchored.
This is reflected, for example, in so-called core inflation, the measure that excludes the effects of food and energy prices.
INE and Eurostat state that “excluding unprocessed food and energy products, the Harmonized Index of Consumer Prices (HICP) in Portugal reached a year-on-year variation of 8.1% in March (8% in the previous month), a pace that is 0.6 percentage point higher than the corresponding rate for the euro area.
If the measure is not harmonised, the underlying inflation calculated by INE has even eased compared to February, but remains very high (7%).
Several economists believe that in May the ECB will factor in the aforementioned slowdown in eurozone inflation to 6.9% in March, a value that has helped average inflation over the past 12 months to slow to an already expressive 8.8%.
This average inflation rate over 12 months makes it possible to assess inflationary pressures since the beginning of the war.
In Portugal, this ballast is more detrimental to purchasing power: the national average increase was 9.1% in March, a record value not seen in recent decades.
And it surpassed the euro average for the first time since the start of the crisis, according to Eurostat series.
Food price rises by almost 20%, but also eases
The current inflation scenario in Portugal now appears more aggressive compared to the European average, but there are signs that more relief may come in the coming months as the base effect (a sharp price increase in the second quarter of the year passes) if it dissipates.
For now, INE says food will drive up inflation in March. It has a lot of strength, but a little less than in February.
In March, among the classes with the largest positive contributions to the year-over-year change in CPI, food and non-alcoholic beverages stood out, with a change of 19.6% (21.5% in the previous month ),” says the institute. .
In contrast, ‘are the only classes with a negative contribution [que travaram o galope dos preços] were transport and health”.
And, last but not least, the National Institute of Statistics underscores a point that could also be a turning point in very high inflation. “The variation of the index related to energy products decreased to -4.4% (1.9% in the previous month)”.
That is, in March, Portugal recorded the first price drop for the energy basket “since February 2021”.
This also happens in most European countries.
For Tiago Correia, economist at BPI’s research firm (BPI Research), “at this point, the negative contribution of the energy component to the consumer price index (CPI) in March continues to pose risks to a possible downward adjustment of our average inflation forecast for 2023 (5 .5%)”.
“On international markets, a barrel of Brent oil in March is about 13% below the average of March 2022 and gas (Dutch TTF) is more than 60% below.”
According to the analyst, “in fact, the energy index in March explains about half the 0.8 percentage point (pp) less in the homologous rate compared to February.”
“If the current prices of these commodities [matérias primas] if they remain at current levels, base effects are expected to be even stronger in the coming months than in March, bearing in mind that, especially for natural gas, international prices only peaked in August.
“We should also point out that a revision of the electricity tariff on the regulated market is planned for April with an expected reduction of 3% on the average monthly bill”, with the energy tariff for customers on the regulated market falling by 5%. euros per megawatt hour (MWh), which “could cover 988 thousand customers”.
In addition, there is the food effect and zero VAT. The BPI economist points to “the slight reduction in the price index of unprocessed food products, even before the entry into force of the zero VAT rate, a measure that should remain in force until October”.
“According to BPI Research calculations, with the verified inflation rates in the food category and fully reflected in prices, this measure could have a potential reduction in global IPC of about 1%,” says the same expert.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
