Portugal was one of the EU Member States to register one of the highest increases in the inflation rate, rising from 9% in June to 9.4% in July, a value higher than the average of the euro zone and which compares to a rate of 1.1% a year earlier. The data was revealed by Eurostat and shows the rate rose to 8.9% in the euro zone from 8.6% the previous month and well above the 2.2% recorded in the same period last year. In the European Union (EU), it reached 9.8%.
The highest annual rates were recorded in Estonia (23.2%), Latvia (21.3%) and Lithuania (20.9%), while the lowest were observed in France, Malta ( 6.8% in both cases) and in Finland (8%). However, compared to June, notes Eurostat, annual inflation fell in six Member States, remained stable in three and rose in the remaining 18.
Figures that do not surprise Nuno Mello. The analyst XTB specifies that this increase was “predictable as the prices of food, alcohol and tobacco accelerated (9.8% against 8.9% in June), as well as industrial goods excluding energy (4.5% against 4.3%) and services (3.7%). % vs 3.4%)”, noting that only the cost of energy slowed due to the drop in oil last month (39.6% vs 42%), this was however not enough to offset the remaining increments. “Excluding energy, inflation also increased from 4.9% to 5.4% and the underlying index, which excludes the cost of energy, food, alcohol and tobacco, fell from 3.7% to 4%. Compared to the previous month, consumer prices rose 0.1%, he added.
João Queiroz, head of trading at Banco Carregosa, admits to Nascer do SOL that the values are in line with estimates, given “still high prices for energy, such as crude oil and gas, high prices for agricultural products such as wheat and corn, against a depreciated euro close to parity against the dollar”, also mentioning that “disruptions in the supply chain are regularized but at a slow pace, like maritime freight, but still with strong corrective potential” .
New records in perspective
Nuno Mello estimates that inflation should remain high and even accelerate further due to the increase in demand for oil during the coming autumn and winter, noting that “in this period, it is common to see a drop in demand, but this can be compensated by an increase in the consumption of oil compared to gas”.
And the warnings don’t stop there. Analyst XTB also mentions that “many countries that have oil-fired power plants may decide to restart their operations, because the price of gas in the equivalent of a barrel of oil is two to three times higher, including the costs associated with carbon emissions”. allowances. This should lead to the energy component driving up inflation further by the end of the year.”
João Queiroz, on the other hand, believes that the expectations are that the prices of certain raw materials, such as crude oil, industrial base metals and agricultural products, may not renew the highs already recorded this year, “this which would motivate the move towards a scenario in which inflation is no longer the main problem and the focus is on the ‘gentle contraction’ of the European economy in the face of the continuing energy crisis which is currently very much based on natural gas (which will be felt next winter)”.
A situation which, according to the head of trading at Banco Carregosa, should be the central argument for inflation to remain high, but with the maximum that may have already been recorded this summer. “Thus, we would start the path of price stabilization (less inflationary pressure), allowing central banks to focus more on the themes of economic stagnation/contraction, employability and the competitiveness of their economy”, he points out.
Faced with this scenario, several governments have proposed new aid of several billion euros aimed at mitigating the effects of rising prices for families and businesses. Portugal are not oblivious and have already waved a package for September, however, the details are not yet known.
But the answer does not stop there. Nuno Mello also recalls that “like what other central banks have done, the ECB should accelerate the pace of interest rate hikes in order to curb consumption and therefore inflation in the medium term” .
For João Queiroz, the solution is to stabilize the global supply “given that the shock is centered on this sphere rather than an excess of growth in demand from families and businesses”, accompanied at the same time “by a greater greater diversification, reduced risk and greater dependence on import markets (because population growth does not stagnate)”.
The official also defends that other geographies, such as Africa and Central and South America, should be the target of greater investment and be more tested, “while seeking to promote the development of these blocs. by reducing strategic dependence on less open countries and less democratic societies”, adding that “less globalization is associated with higher prices and therefore with inflation processes, but also the greater disparity in the distribution of nations’ wealth also contributes negatively to the diversification of commodity markets, presenting a greater risk of inflation”.