WEEK IN REVIEW
€1,000 mn of Portuguese debt was emitted this Wednesday, with the majority (800 mn) of the debt having a maturity of one year. The interest rate was 0.216%: less than half the rate obtained a month ago on one-year bonds (0.453% for 850 mn) and the lowest rate since 2003. This may be a sign that the situation with BES is having less impact on the perception of Portuguese risk, since these record minimum rates follow a week of continued uncertainty that led to a direct intervention from the central bank.
Public debt rose to 134% of GDP in June, compared to 132.4% in March. The Bank of Portugal announced that Portuguese debt was at € 223,270 mn in June, 4% above the level in June of last year (€214,842 mn).
The current account fell in June, with imports and exports both increasing (8.56%yoy and 2.39%yoy respectively), but with a widening gap. The 12 month accumulated account fell into negative territory for the first time (falling 221.39%) and the combined balance of payments fell 22.61% from the previous month. The fall is mainly due to a fall in transfers and income, as the commercial account in June rose 72.05%yoy. However, the commercial account for the first semester of 2014 was weaker than the analogous period in 2013, down 19.36%yoy.
After disappointing Q2 growth in the Eurozone, the flash PMI estimate is slightly more optimistic, registering 52.8 in August, down from 53.8 in July but above 50 for the fourteenth consecutive month. The weakness of the recovery is cited as the main reason for poor job recovery, with job creation stagnating in the Eurozone overall.
WEEK AHEAD August 25th-29th
- August 28: (European Commission) Economic Sentiment Indicator for August will be published. A flash estimate this week indicated that in August the consumer confidence indicator decreased in both the EU (falling 0.9 points to -6.4) and the Euro area (down 1.6 points to -10.0).
- August 29: (Eurostat) With the release of July unemployment numbers, we will see if the robust second quarter job growth in Portugal continued into Q3.
- August 29: (INE) The release of the Industrial Production Index for July will give an early indication of third quarter GDP, after a mild recovery in the second quarter.