Inflation in Portugal higher than average

Inflation in Portugal higher than average

Portugal was one of the EU member states to record one of the largest increases in inflation, from 9% in June to 9.4% in July, a value above the eurozone average and compared to a rate of 1.1% per year. years earlier. The data, released by Eurostat, indicates that the rate reached 8.9% in the eurozone, compared to 8.6% in the previous month and well above the 2.2% recorded in the same period last year. In the European Union (EU), it reached 9.8%.

The highest annual rates were recorded in Estonia (23.2%), Latvia (21.3%) and Lithuania (20.9%), while the lowest were observed in France, Malta (6.8% in both cases) and Finland (8%). Compared to June, Eurostat notes, annual inflation fell in six Member States, remained stable in three and rose in the remaining 18.

Figures that don’t surprise Nuno Mello. The XTB analyst says this increase was “expected as prices of food, alcohol and tobacco rose (9.8% compared to 8.9% in June), as well as non-energy industrial goods (4.5% vs. 4.3). %) and services (3.7% vs. 3.4%)», noting that only energy costs have slowed down due to the oil price drop last month (39.6% vs. 42%), yet this was not enough to offset the remaining increases. «Excluding energy, inflation also rose from 4.9% to 5.4% and the core index, which excludes the cost of energy, food, alcohol and tobacco, rose from 3.7% to 4% Compared to the previous month, consumer prices rose by 0.1%, he added.

João Queiroz, head of trade at Banco Carregosa, admits to Nascer do SOL that the values ​​​​are in line with the estimates, taking into account «the still high prices of energy, such as crude oil and gas, the high prices of agricultural products such as wheat and corn, at a depreciated euro close to parity against the dollar”, also stating that “disruptions in the logistics chain have been regularized, but at a slow pace, like ocean freight, but still with high corrective potential “.

New records in perspective
Nuno Mello believes inflation should remain high and accelerate even further due to the increase in oil demand over the coming fall and winter, noting that “during this period, demand is normal for a decline in demand, but that can be offset by an increase in oil-to-gas consumption.”
And the warnings don’t stop there. The XTB analyst also mentions that “many countries with oil-fired power plants may decide to restart their operations, as the price of gas in the equivalent of a barrel of oil is two to three times higher, including the costs associated with the CO2 emissions.” emissions surcharges, which should lead to the energy component pushing up inflation even further by the end of the year».

João Queiroz, on the other hand, believes that the prices of some commodities, such as crude oil, industrial base metals and agricultural products, will not repeat the highs already recorded this year, «which would motivate the evolution to favor a scenario where inflation would no longer be the main issue and the focus would be on the ‘soft contraction’ of the European economy in light of the continuation of the energy crisis which is currently heavily based on natural gas (which it will feel next winter)”.

A situation that, according to the head of trade at Banco Carregosa, should be the central argument for keeping inflation high, but with the maximum that may already have been recorded this summer. “For example, we would take the path of price stabilization (less inflationary pressures), allowing central banks to focus more on the themes of economic stagnation / contraction, employability and competitiveness of their economies,” he emphasizes.

control measures
Given this scenario, several governments have proposed new aid packages worth billions of euros to mitigate the impact of rising prices on households and businesses. Portugal is not aware and has already waved a package for September, the details are not yet known, however.

But the answer doesn’t stop there. Nuno Mello also recalls that “like what other central banks have done, the ECB should accelerate the pace of interest rate hikes in order to curb consumption and, consequently, inflation in the medium term”.

For João Queiroz, the solution is to stabilize global supply “as the shock is concentrated in this area rather than an excessive growth in demand from households and businesses”, accompanied at the same time by “greater diversification, reduction of risks and increased dependency of import markets (because population growth does not stagnate)’.

The official also defends that other regions, such as Africa and Central and South America, should be the target of more investment and more testing, “and also try to promote the development of these blocs through the strategic reliance on less open and less democratic societies”, adding that “less globalization goes hand in hand with higher prices and thus inflation processes, but also the greater inequality in the distribution of the wealth of nations also contributes negatively to the diversification of the commodity markets, which a greater risk of inflation”.

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