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Portugal Remains Deflationary

James Boston
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According to data just released for August, Portugal has seen some improvement in it’s Consumer Price Index (CPI) but this still remains firmly in deflationary territory. Year on year the CPI is now showing at -0.4%, this is a substantial pick up on the -0.9% seen in July and also easily beats the market expectation for a reading of-0.8%. Month on month the rate now stands at -0.2%, again a measurable pick up on June’s -0.7% and well ahead of the market consensus estimate for a -0.6% adjustment to in general prices.

Post bail out Portugal is moving in the right direction but is far from steady or stable according to recent economic data. Even with the larger than expected second quarter GDP reading the anticipated GDP growth for the full 2014 year looks set to miss the targeted 1.0% expansion, a parliamentary research agency has noted that in order to hit this target the last two quarters will need to deliver growth of 0.5% each and this is highly improbable given the traditional slowing of growth in Portugal in latter part of the year, the agency UTAO is now projecting full year economic expansion of just 0.8%.

Despite the likely disappointment in overall grow there are still plenty of signs that Portuguese revival is on the cards. Consumer confidence and the ensuing demand are continuing to strengthen, this domestic economic activity is yielding benefits particularly as the increased tax take is enabling better control over the deficit. The real boost to the Portuguese economy however is coming from the dramatic turnaround in the balance of trade, despite waning global and particularly Eurozone demand, Portugal has managed to significantly boost it’s exports over the course of the last year, the tourism sector is the it’s notable leader in this field.

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