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Portugal Inflation May 2024

Portugal: Harmonized inflation rockets to eight-month high in May

Harmonized inflation surged to 3.8% in May from April’s 2.3%. May’s reading was the highest inflation rate since September 2023 and easily outpaced the Euro area average of 2.6%. Looking at the details of the release, prices for food and non-alcoholic beverages rose at a quicker pace in May due to a base effect arising from a VAT exemption for food that was introduced in May 2023. Moreover, price pressures for hospitality more than doubled and transport price growth accelerated, boosted by the impact of two recent Taylor Swift concerts in Lisbon.

That said, the trend pointed down, with annual average harmonized inflation coming in at 3.3% in May (April: 3.5%), the joint-lowest reading since April 2022. Meanwhile, consumer price inflation rose to 3.1% in May from the previous month’s 2.2%.

Finally, harmonized consumer prices increased 1.04% over the previous month in May, a smaller rise than the 1.06% increase recorded in April. May’s result marked the weakest reading since February.

Despite the recent resurgence in price pressures, our panelists forecast harmonized inflation to recede significantly from current levels by year-end and average around half of last year’s level in 2024 as a whole. However, average annual inflation will not fall below the ECB’s 2.0% target until 2025.

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