Portugal: Economic growth ticks up in Q2
Detailed national accounts data, released by the Statistical Institute on 31 August, confirmed that the economy picked up slightly in the second quarter of 2018. Economic growth in quarter-on-quarter terms inched up to 0.5% in Q2 2018, from 0.4% in Q1 2018.
A breakdown of the headline result shows that the acceleration was underpinned by a rise in domestic demand, driven by an upturn in total investment. A marked rise in inventories fueled the upturn in total investment and contributed 0.6 percentage points to growth after 0.2 percentage points were deducted from growth in the previous quarter. Meanwhile, fixed investment rose 1.0% over the previous quarter in Q2, marking a weaker upturn than the 2.4% quarter-on-quarter expansion seen in Q1. Private consumption growth came in flat over the previous quarter in Q2, following a 0.8% quarter-on-quarter rise in the first quarter, as a drop in consumption of non-durable goods and services outweighed the rise in consumption of durable goods.
While exports accelerated, the external sector continued to drag on growth as imports outpaced exports. Exports rose 1.8% over the previous quarter in Q2 (Q1: 0.0% quarter-on-quarter), while imports climbed 2.5% in quarter-on-quarter terms (Q1: +0.9% qoq). Matching last quarter’s reading, the external sector deducted 0.4 percentage points from the GDP reading.
Economic growth, in year-on-year terms, also picked up: GDP expanded 2.3% over the same month last year in Q2, slightly up from a 2.1% annual expansion in the previous quarter. Domestic demand drove the print, while the external sector once again chipped away at growth.
Although the economy is expected to slow this year from last year, the pace of expansion should remain solid, supported by continued strong employment generation, higher inflows of foreign investment, a thriving tourism sector, and the ongoing housing boom.