A CIP/ISEG Barometer Pegs Portugal's Spring Growth at 2 Percent as Rising Oil Prices Squeeze Company Margins

Portugal's economy likely grew around 2 percent in the second quarter compared with a year earlier, according to the latest barometer from the CIP (Confederação Empresarial de Portugal, the Portuguese Business Confederation) and the ISEG (the Lisbon School of Economics and Management). The estimate points to an economy still expanding, but at a gentler pace than at the start of the year — and one increasingly weighed down by energy costs.

On a quarter-on-quarter basis, the barometer puts growth at just 0.4 percent between the first and second quarters. That is a step up from the first three months of the year, when the economy stagnated with zero quarter-on-quarter growth, but it is hardly a spring surge. In year-on-year terms the reading of roughly 2 percent compares with 2.2 percent in the first quarter, a modest deceleration rather than a sharp slowdown.

The recovery that didn't quite arrive

The numbers matter because they undercut the more optimistic scripts written earlier in the year. Analysts had pencilled in a firmer rebound around March and April that, in the barometer's assessment, ultimately did not materialise. Consumer confidence did improve in May and June after a weak stretch, but it remained below the average levels seen in the first quarter — a sign that households are steadier than they were, without being exuberant.

Underneath the headline figure, the composition of growth is shifting. The barometer expects an improved contribution from net external demand — exports pulling more of the weight — while domestic demand is set to add less to the annual variation than before. That is a reversal of the pattern that has powered much of Portugal's post-pandemic expansion, in which spending at home did the heavy lifting.

Oil prices bite

The cloud over the outlook is energy. Rising oil prices are "increasing pressure on companies, which once again see their energy costs heavily inflated," said Rafael Alves Rocha, the CIP's director-general. With crude prices pushed up by tension in the Middle East, the squeeze on business margins feeds through to fuel at the pump and, eventually, to the prices households pay — the same inflationary current that has been lifting the cost of living across the country.

The barometer lands on the same day the Instituto Nacional de Estatística (INE, the National Statistics Institute) is due to publish its own flash estimate of second-quarter output, which will offer the official reading against which the CIP and ISEG projection can be judged. Private-sector barometers of this kind are designed to anticipate the official data by a few days, giving businesses and policymakers an early steer. For now, the message is one of steady but unspectacular growth, with the direction of oil prices likely to decide whether the second half of the year holds up or drifts.