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INE confirms inflation down to 7.4% in March and energy prices fall

Inflation stood at 7.4%, INE confirmed. The index for energy products recorded negative values for the first time since February 2021. Foodstuffs also decelerated

The National Statistics Institute (INE) confirmed this Thursday, 13 April, that the rise in prices is slowing down in Portugal. The year-on-year change in the Consumer Price Index (CPI) fell to 7.4% in March, as indicated by INE in the flash estimate, which means a rate 0.8 points lower than in February. The slowdown occurs for the fifth consecutive month.

This change was mainly due to the energy products index, which decreased to -4.4%, compared to 1.9% in February. This is the first negative figure since February 2021.

The unprocessed food index, on the other hand, decelerated to 19.3%, from 20.1% in the previous month.

Underlying inflation, which excludes unprocessed food and energy products, registered a variation of 7.0%, slowing down from 7.2% in February.

The monthly variation rate of the CPI was 1.7%, accelerating from 0.3% in the previous month. Excluding unprocessed foodstuffs and energy, the CPI change was 2.0%.

The product class that most contributed to the monthly variation was Clothing and Footwear, with 22.7%, "as a result of the start of the new clothing and footwear collection, as is usual in the months of March".

The average variation over the last twelve months is 8.7%, up one point from 8.6% in February. Excluding unprocessed food and energy products, the average variation rate was 6.6%. The average variation in the index of unprocessed food products was 16.0%, compared to 14.8% in February. The average change in energy products was 19.6%, down 21.9% from the previous month.

Inflation expected to slow further due to base effect

The INE underscores that March's deceleration is "partly explained by the base effect resulting from the increase in fuel and food prices in March 2022".

In other words, in 2022 "the CPI recorded significant price rises in most of the products considered in the sample, and the year-on-year rates of change are now falling", partly as a consequence of the base effect. This impact began to be felt in January, but was more intense in February and March.

"Whenever the monthly variation of a month is lower than the monthly variation of the homologous month, the homologous variation rate will inevitably decrease, and vice-versa," says the INE. However, despite the slowdown in inflation in recent months, "the average price level has maintained an upward trajectory, reaching in March 2023 the highest value of the series, 12.5% higher than the average price level in 2021".

And for the price level to return to values comparable to those of 2021, concludes INE, "there would have to be a period with negative year-on-year rates of change". And "without a new shock involving significant price increases", it is possible to anticipate "a progressive reduction in the year-on-year rate of change of the CPI over the coming months, as a result of the strong acceleration recorded in the second quarter of 2022".

For example, in food and non-alcoholic beverages, there was a decrease in the year-on-year variation, but "the series reached a new high in March 2023, with prices 27.0% above the average price level of 2021," notes INE.

In the case of energy, "provided that there are no price increases above 2022 in the coming months, the year-on-year change in this aggregate should remain negative, as a direct consequence of the base effect.


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