LISBON: Portuguese inflation rose in March, but the increase was mainly due to the end of winter discounting on clothes and footwear, suggesting a recovery in internal demand in the recession-hit country remains elusive.
Clothing and footwear prices jumped 26 percent as new collections hit the stores, pushing last month's consumer price index 1.7 percent higher from February, when prices fell 0.1 percent, the National Statistics Institute said on Wednesday.
Year-on-year inflation also picked up, clocking 0.5 percent after prices were unchanged in February.
"Despite the inflation being somewhat higher than usual at this time of the year, we think the trend of weakening inflation remains," said Paula Carvalho, an economist at BPI bank in Lisbon.
Filipe Garcia, head of Informacao de Mercados Financeiros consultants in Porto said "the figure does not reflect strengthening of internal demand".
Analysts generally expect inflation to drop to around 1 percent for all of 2013 from last year's 2.8 percent.
Portugal has imposed painful tax hikes and pay cuts under the terms of a 78-billion euro EU/IMF bailout. The austerity has hit consumer demand and caused the deepest recession since the 1970s.
The economy is expected to shrink 2.3 percent this year after last year's 3.2 percent slump.
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