(reading time: 3 mins)

CPI Portugal final data – March CPI: 2.71%YoY/202bpMoM, above moving averages, and Core data 2.0%YoY; in line with preliminary data. Energy, +5.74%YoY/+6.65%MoM, was the main justification to the strong price change, as, for instance, Services inflation 3.41% remains almost stable. Our main assumption is that inflation shouldn’t broadly increase or inflation second round-effects should be manageable. Nevertheless, if the Governments adopt fiscal expansionary policies and higher budget deficits, the internal demand will be stimulated and the small change on prices could become structural, which means the central banks will be under huge pressure to tight.         

The Portuguese Statistic Institute has just released, March’s CPI final data and its subcomponents.  

We would highlight the following:

• CPI: +2.71%YoY; in line with preliminary data; +202bp sequentially; compares with the 12MMA (12 months moving average): 2.3% and 3MMA of +2.2%;
• Core CPI: +2.01%YoY (+186bpMoM); compares with the 12MMA: +2.1% and 3MMA +1.9%;

• Services: +3.41%YoY vs. 12MMA: +3.8% and 3MMA: +3.3%;
• Goods: +2.21%YoY vs. 12MMA: 1.2% and 3MMA: +1.4%;    
• Energy: +5.74%YoY (+6.65%MoM) vs. 12MMA: -0.4% and 3MMA: +0.4%;

• Food and Non-alcoholic Bev: +3.65%YoY vs. 12MMA: +3.3% and 3MMA: +3.5%;
• Clothing and Footwear: -1.98%YoY vs. 12MMA: -1.7% and 3MMA: -1.9%;
• Household Equipment: -1.76%YoY vs. 12MMA: -1.7% and 3MMA: -2.3%;  
• Restaurant/Meals: +6.63%YoY vs. 12MMA: +6.4+% and 3MMA: +6.6%;
• Postal Services: +5.80%YoY vs. 12MMA: +6.1% and 3MMA: 5.9%;
• Telecommunications (bundle services) -0.88% YoY vs. 12MMA: -1.4% and 3MMA: -0.8%;
• Rents +5.12%YoY vs. 12MMA: +5.1% and 3MMA: 5.1%.
• 
  

  Our comments: final inflation data in March, 2.7%YoY and Core: 2.0%; in line with preliminary data and clearly suffering from higher energy prices, +5.74%YoY/6.65%MoM; as in fact Core data, without fresh food and energy, at 2.0% remains in line with moving averages (12MMA: 2.1% and 3MMA: 1.9%). Meanwhile, Services at 3.41% remains below 12MMA and almost in line with 3MMA. The coming months will be quite important, as depending on second-round effects of inflation, the central banks will increase interest rates. Our main assumption is that inflation indirect effects will be manageable, nevertheless, the adoption by the governments of expansionary fiscal policies and higher budget deficits could stimulate the demand and pressure prices upwards. If it will be the case, central banks for sure will act.        

Source: INE, AS Independent Research