The Week Ahead (July 8-12), Portugal – A Hostage To Weak Eurozone Growth

Portugal is set to unveil updates on its rate of inflation and trade balance in the week ahead, as fears flare over the U.S.’s proposal to impose additional tariffs on imported European Union goods.

Portuguese economic data is mainly scheduled for release Wednesday, July 10, when the country will provide a final gauge of consumer prices for June, as well as fresh trade balance figures for May.  

Wednesday, July 10

  • Consumer Price Index (Final – June)
  • Trade Balance (May)

The pace of Portugal’s CPI has been gradually decelerating, with June’s rate having slowed to 0.4 on an annual basis from 0.42 previously, despite rising domestic demand and wages.

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Portugal Inflation has been on downward slide

The largest downward contributions to the overall annual rate of change stemmed from lower prices of clothing and footwear, as well as communications. Meanwhile, prices rose most for transports and miscellaneous goods and services, according to Statistics Portugal.

Inflation had also fallen to 0.8% year-on-year in the first quarter of 2019 from 1.2% in the prior year, while core inflation rose only slightly above the headline rate in early 2019.

Against this backdrop, the European Commission (EC) recently highlighted that risks in Portugal are “tilted to the downside” and linked in part to “uncertainties surrounding the macroeconomic outlook.”

Real GDP growth in the nation eased to 2.1% in 2018 from a peak of 2.8% in 2017, which the EC attributed to “an abrupt slowdown” in exports.

However, the EC added that “domestic demand remained solid, particularly private consumption, while investment growth slowed after an exceptional performance in 2017.” The European body said it expects investment and private consumption to “continue supporting growth, offsetting most of the negative impact from external trade.”

Trade factors

With the looming threat of U.S.-imposed tariffs on imported EU goods, the Euro Area may face a protracted economic slowdown, which would likely pose a downside scenario for Portugal’s financial well-being.

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