Households living in Portugal appear to be resisting inflation, according to first-quarter food consumption data released yesterday by the National Institute of Statistics (INE), in the peak of national accounts for the first quarter . Expenditure on ‘durable goods’ such as cars also rose sharply.
For four consecutive quarters the volume of food commodities has declined in real terms, i.e. households have spent much more on these purchases, but the volume (excluding inflation) has fallen sharply, meaning that people have reduced the quantities they have taken home to address the rising cost of living.
The volume decline between the first and last quarter of last year was even more pronounced than in the austerity years of the troika adjustment program and the PSD-CDS government.
But as INE shows in the new quarterly peak of national accounts, there appears to be a small positive revision at the start of the year. Households were able to take slightly more food home (0.2% more than in the first quarter of last year, a period marked by the outbreak of war and rising inflation).
Here, in the first three months of this year, two things happened: Portuguese households increased their spending on food like never before, with respective current expenditures rising by more than 19% year-on-year.
But unlike what happened in 2022, this increase in nominal food spending comes in a context of inflation, which is still high but slowing down.
In any case, the increase in current expenditure on food recorded the highest value (the aforementioned 19.3%) in the INE series, dating back to 1996.
In 2022, as reported by Dinheiro Vivo (DV) in early March, resident families have significantly reduced the amount of food purchased in 2022 (the largest reduction ever recorded).
However, the amount paid for food on household bills rose at a record pace last year, driven by galloping inflation, reaching the highest value in the official series, according to INE.
In other words, the past year has been marked by unequivocal signs that many families – especially the poorest, with lower disposable incomes and more vulnerable to rising interest rates because they have rising bank debts with rising interest rates – have even been forced to cut back on food in order to save or withstand the impact of the deteriorating cost of living, namely those costs associated with housing.
Thus, the payments to the bank shot up. There are instances where they have doubled, especially in more recent loan agreements where the capital owed is of course significant.
In any case, the share of the family budget that goes to food remains at a record level.
According to calculations by DV, this type of expenditure absorbed 21% of total household consumption expenditure in the first quarter.
“Private consumption, which represents more than 65% of Portugal’s gross domestic product (GDP), accelerated in a chain, but slowed in homologous terms,” notes Teresa Gil Pinheiro, economist at BPI.
Portuguese buy more cars and food
“For this behavior has contributed to the sharp increase in the car sales and the recovery of food consumptionwhich had contracted year-over-year in the previous four quarters,” the analyst confirms.
In fact, in addition to food, which halted the one-year recession trend, spending on durable goods increased by nearly 11% in the first quarter of this year compared to the same period in 2022, INE reveals.
In any case, this was not enough to prevent a significant slowdown in consumption and domestic demand in general. Soon this was also reflected in the global growth of the economy in the first quarter.
In real terms, the economy as a whole still grew at 2.5%, one of the best rates in Europe (as Eurostat said 15 days ago) and double the pace of the Eurozone. Meanwhile, it was announced that Germany, the single currency’s largest economy, had entered a recession.
But in the case of Portugal, economists are confident that households can see some relief in this second quarter (which started in April). In fact, inflation is decreasing rapidly; Unemployment, after rising sharply (to 7% of the labor force in March), also showed signs of a slight fall yesterday in April (see texts opposite).
In the note from BPI’s research firm, the economist explains that “the economy advanced by 2.5%, benefiting also from the larger contribution from foreign demand and the stagnation of the contribution from internal demand”.
The acceleration in exports in the first quarter is “in both goods and services components”, but imports “accelerated as well, up 1.3% in chain terms, with goods imports accelerating (explained by the increase in car sales) and with the fall in imports of services”.
Total exports from Portugal increased by almost 11% in the first quarter, according to INE.
Tourism is on the rise, the rest less so
On the business side, on the supply side, it seems that tourism and related services are saving the face of economic growth.
“Gross value added (VAT) at constant prices increased by 2.9% (3.8% in the previous quarter),” says Teresa Gil Pinheiro.
In the productive sectors (companies), “the decline in industry and construction stands out”, but in compensation there is “the acceleration in trade, restaurants and hotels (in line with the good moment of tourism), whose behavior in the first quarter explains more than half (52.5%) of gross value added growth,” the same analyst explained in response to the INE peak.
Luís Reis Ribeiro is a journalist for Dinheiro Vivo
Source: DN
