MacroEconomic Bulletin - First half of April 2023



The IMF has revised its economic growth forecasts and expects global GDP growth to be around 3% over the next five years. This is the worst medium-term scenario since 1900 and is below the global GDP growth average of the last 20 years (+3.8%). The IMF still stresses the need to continue fighting inflation and safeguarding financial stability, due to the recent financial sector turbulence. Regarding inflation forecasts, the IMF expects a decrease from the +8.7% presented in 2022 to +7.0% in 2023 due to lower commodity prices, although core inflation is expected to decline at a slower pace. As for the four major eurozone economies, the outlook differs. While expectations for this year improve for Spain (+1.5% versus +1.1% previously) and Italy (+0.7% versus +0.6%), expectations for Germany, in contrast, worsen, estimating a decrease of -0.1%, versus +0.1% previously estimated. Whereas France maintains an estimated growth of +0.7%.

Final composite PMI, in March, the Eurozone economy expanded at the strongest pace since May 2022. The Final composite PMI of the Eurozone registered an increase to 53.7 points (52.0 in February), reaching a ten-month high. However, the overall growth rate remains moderate and is only driven by the services sector (55.0 in March), with the manufacturing sector remaining constant (50 points). New order volumes increased for the third consecutive month due to the expansion of demand in the eurozone, having a positive effect on employment. The countries with the largest gains were Spain and Italy (58.2 and 55.2 respectively, a 16-month high), followed by increases in France and Germany (52.7 and 52.6). Specifically, in Spain, the services sector PMI posted the highest growth since November 2021, a strong expansion for the fifth consecutive month. In the case of France, the service sector is also growing at a higher rate than the manufacturing sector. Similarly for Germany, although the manufacturing PMI fell to its lowest level in almost three years, this primarily reflected a considerable shortening of average supplier lead times.

In March 2023, inflation remained on a downward trend in the United States. The year-over-year CPI presented a moderate decrease in March 2023 compared to the annual rate in February 2023. The CPI in EEUU reached +5.0% yoy in March 2023 (+6% yoy in February), with a +0.1% monthly rate over February. The core inflation, however, closed the third month of 2023 with an increase of +5.6% yoy. In March 2022, faced with rising prices, the FED increased interest rates between 4.75% and 5%. The next possible revision of this figure will be announced on May 3, where Fed officials will discuss a possible increase despite a financial storm caused by the fall of Silicon Valley Bank. According to the Fed's forecasts, interest rates are expected to be in the range of 5%-5.25% at year-end, in an attempt to further reduce inflationary pressures.


The significant drop in inflation in March has been confirmed by the INE, falling to +3.3% yoy (+6.0% in February). This drop is mainly due to the base effect, given the price increase experienced in March 2022 with the outbreak of the war. Thus, the components with the main downward influences are housing (-12.6% yoy) and transportation (-4.8%) due to lower fuel and electricity prices. Nevertheless, food continued to exert upward pressure, although to a slightly lesser extent than in the previous month (+16.5% yoy vs. +16.6%). Meanwhile, core inflation, not yet influenced by the statistical effect, remains high at +7.5% yoy (+7.6% in February).

Regarding the labor market, March recorded the highest growth in the number of Social Security (SS) enrollees in the historical series.In seasonally adjusted terms, the number of SS affiliates increased by 151,943 people in March and reached 20.5 million.As for the average number of affiliates, there are 542,049 more workers than a year ago (+2.7% yoy), and this growth occurs in high value-added sectors such as Information Technology and Telecommunications, whose number of enrollees has grown by +20.8% compared to pre-pandemic data. In addition, there are 2.6 million more members with permanent contracts, which means that in March, the percentage of members with temporary contracts decreased to a historic low of 14% of total contracts.

On the other hand, other economic indicators have been published, which point to a slight worsening of both demand and supply. On the supply side, the INE has published the Industrial Production Index, which shows an annual decrease of -0.4% yoy (adjusted for seasonal and calendar effects). Nevertheless, industrial production presented a positive monthly increase (+0.6%).Likewise, consumer confidence decreased, standing at 67.4 points, which represents 4.1 points less than in February.


The INSEE revised March inflation upwards to +5.7% yoy (+6.3% in February), one tenth of a percentage point higher than published with the index advancing. Thus, although it presents the lowest inflation rate since September, it remains high and above market expectations. As for the components, the downward influence of energy prices (+4.9% vs. +14.1% in February) stands out, while services and manufactured goods remained high (+2.9% yoy and +4.8% respectively), with food continuing to be the major upward driver (+15.9% yoy). Regarding core inflation, this in turn remained sticky, increasing slightly to +6.2% yoy (+6.1% in February).

On the other hand, In February 2023, the manufacturing industry recovered with respect to the previous month.Its index increases +1.3% mom, as well as in the whole industry (+1.4% mom). Particularly, this was observed to a greater extent in the transport equipment manufacturing sector (+5.6% after -7.6% mom). These data point to a positive evolution for the industrial sector, which we can also observe on a year-on-year basis, +1.7% yoy manufacturing industry and +0.5% yoy industry as a whole. However, as a consequence of the context of rising energy and gas prices, output declined sharply in energy-intensive industries. For instance, the manufacture of basic iron and steel products (-25.9% yoy) and the manufacture of paper and cardboard (-22.5%) or chemical products (-19.9%).

Moreover, in February 2023, household consumption expenditures in goods decreased. Its decrease was -0.8% mom, after +1.7% mom in January. In the case of food products, it presented the largest drop (-1.2%) after a rebound in January (+0.6%). However, the trend for food products is negative, following several months of successive declines. Another significant decline has occurred in manufactured goods (-0.9% mom, after +1.6% mom in January), due to the decline in durable goods consumption (-1.4% mom, after +3.4% mom in January). Nevertheless, household spending on energy remained almost stable (+0.1% mom, after +4.3% mom), as electricity and gas consumption increased again during the month but, at the same time, fuel consumption decreased considerably.


The Statistisches Bundesamt has confirmed March 2023 inflation figures, +7,4% yoy (+8.7% in February). Therefore, the inflation rate has slowed, but remains at an elevated level. Food prices show the highest increase (+22.3% yoy), compared to the same data in February (+21.8%). At monthly rates, compared to February 2023, food prices increasd (+1.3% mom). As for energy, although it maintained positive growth, it slowed considerably (+3.5% yoy vs. +19.1% in February). However, we highlight that the deceleration is explained by the base effect explained before.

In February, industry production in real terms was +2.0% yoy. Most sectors showed positive evolutions, but the vehicle manufacturing sector increased especially (+7.6% mom). While energy production did not increase its output in February 2023 (-1.1% mom), there was an increase in output in the energy-intensive industrial branches (+1.9% mom).

Finally, export and imports also showed a positive trend in the last month, +4.0% mom  (+7.6% yoy)  and +4.6% mom (3.8% yoy), respectively.


The Portuguese INE has confirmed the March 2023 inflation figure, which decreases to +7.4% yoy (+8.2% in February 2023). This deceleration mainly reflects the base effect related to the price increases registered in March 2022. Moreover, the annual core inflation rate stands at +7.0% yoy (7.2% in the previous month). Despite the decline in both price indexes, inflation is still high. On the one hand, the unprocessed food index stood at +19.3% (+20.1% in the previous month) and on the other hand, however, the annual rate of change for energy products decreased to -4.4% (+1.9% in February 2023), the first negative value since February 2021.

As for other economic indicators, the external sector and the manufacturing sector continue to present increases in February. In February 2023, exports and imports of goods increased, in nominal terms, +7.0% and +6.7%, respectively (+13.8% and +10.8% in January 2023). Nevertheless, the trade balance continues to fall below February 2022 figures, worsening by €129 million, standing at €2,367 million. Regarding industrial production, the year-on-year rate of change was +1.8% in February (+4.7% January 2023), although the monthly rate was -2.0%, compared to January 2023. Furthermore, if we exclude the Energy grouping, we see a negative variation of -1.5% yoy (+2.0% January 2023). Taking into account the manufacturing industry, the year-on-year rate of change was -2.5% (+1.5% in January).  Thus, although both indicators continue to report positive variations, these are below those of January 2023, which may indicate a slowing trend.

Finally, the tax burden remains below the EU average. In 2022 the tax burden increased compared to 2021, in nominal terms, by +14.9%, which is 35.4% over Portugal's GDP, but remains below the EU27 average (40.5%). The main cause comes from the increase in direct taxes, which rose by +24.1% (mainly reflected 12.8% by the IRS income tax). Indirect taxes increased to a lower rate (+12.2%), determined by the increase in value added tax (+18.1%, +13.7% in 2021).