Addedum to the Quarterly Newsletter - 2020:Q1
When the Quarterly Newsletter n.60 (Year XV) was published on the past March 23rd, NECEP decided to publish the document with only the scenarios for the year 2020, without putting out the usual estimates for GDP growth in the first quarter of 2020, as well as the medium term forecasts (2021 and 2022). The addendum we are now making available presents the whole set of estimates and forecasts in the usual time frames, serving as a complement to the document that was disseminated last March 23rd.
Quarterly Newsletter - 2020:Q1
NECEP Quarterly Newsletter (1st Quarter 2020) about the short-term behavior of the portuguese economy (FTC) is now publicly available both on the CATÓLICA-LISBON website and in the press in Portuguese. The English version will be available here soon. NECEP’s FTC (“a Folha”) presents forecasts for the main macroeconomic aggregates, including GDP.
Quarterly Newsletter - 2019:Q2
In the second quarter of 2019, NECEP estimates that GDP increased 0.6% over the previous quarter (q-o-q) and 1.8% year-on-year (y-o-y) after 0.5% and 1.8% in the first quarter. Thus, the outlook for the Portuguese economy remained broadly stable in relation to the previous quarter, with most of the high frequency indicators validating the permanence of the improvement recorded at the beginning of the year. In particular, a further decline in the unemployment rate is expected from the previous 6.8% to 6.2%, partly due to seasonal factors.
Quarterly Newsletter - 2019:Q1
In the first quarter of 2019, NECEP estimates that GDP increased 0.7% over the previous quarter (q-o-q) and 1.9% year-on-year (y-o-y) after 0.4% and 1.7% in the fourth quarter of 2018. The unemployment rate might be 6.5% after 6.7% in the last quarter. In general, several quantitative and qualitative indicators signal the slight improvement of the Portuguese economy in early 2019, but without abandoning a moderate recovery path.
Quarterly Newsletter – 2018:Q4
In the fourth quarter of 2018, NECEP estimates that GDP increased 0.5% over the previous quarter (q-o-q) and 1.8% year-on-year (y-o-y). This quarterly growth keeps the moderate recovery of the Portuguese economy from the 0.3% q-o-q and 2.1% y-o-y growth rates of the third quarter of 2018. In the last year, the overall growth might be 2.1% after 2.8% in 2017, with an unemployment rate of 7.0% (8.9% in 2017).
Quarterly Newsletter – 2018:Q3
In the third quarter of 2018, NECEP estimates that GDP increased 0.6% over the previous quarter and 2.4% year-on-year as in the previous quarter. This quarterly growth keeps the moderate recovery of the Portuguese economy since 2013, with occasional oscillations as in the first quarter. In fact, the Portuguese economy is ongoing a recovery initiated in the first quarter of 2013.
Price-Matching Guarantees as a Direct Signal of Low Prices
A Price-Matching Guarantee (PMG) is a firm's promise to reimburse its consumers if they find a lower price elsewhere. Most PMG promises are advertised together with a statement that the firm offers low prices, such as “we are so confident that our prices are the best in the industry we are willing to back them with a price-match guarantee”.
Experimental evidence finds that consumers perceive stores that offer a PMG to have low prices. Hence, a PMG may act as a signal of low prices which attracts consumers to the store.
However, once the consumer enters the store, it seems that there is no incentive for the firm to actually charge a low price. The firm could offer a PMG to attract consumers and then charge a high price knowing that, once the consumer is in the store, he will still purchase the product, even at such high price, because consumers are usually time constrained at the moment of purchase.
It appears that the consumer belief that PMG stores charge low prices paradoxically leads those stores to charge high prices. This prediction is not consistent with empirical evidence that finds that, in many markets, PMG stores do offer lower prices than the remaining stores.
The economics and marketing literature have solved this apparent paradox by finding that if firms are sufficiently asymmetric, PMGs can be a credible signal of low prices. For example, if two retailers face different costs for the product they sell, only the retailer with low cost offers a PMG and it optimally charges the lowest price. The retailer with high cost refrains from offering a PMG because, if it did, it would sell to its consumers at a suboptimal price.
The previous literature finds that, if firms are differentiated (e.g. different costs or service quality), a PMG may serve to communicate such differentiation to consumers. In the above example, consumers would infer that a PMG store has lower costs and, for that reason, it also charges a lower price. However, PMGs exist in many markets where firms are almost identical.
An interesting question, from a managerial standpoint, is whether it is possible for otherwise identical firms to differentiate themselves by their PMG strategies. This paper finds that a PMG can be a credible signal of low prices even if firms are identical. In this case, a PMG acts as a direct signal of low prices: consumers perceive PMG stores to have low prices not because they expect them to have low costs or low service, but simply because they offer a PMG.
A critical aspect behind this result is that a PMG allows consumers a grace period in which they can search after purchase (usually between one week to one month). If a consumer visits a PMG store and finds that it charges a high price, the consumer may still buy the product because he may be time constrained at the moment of purchase. However, the consumer may have some free time later to search for a lower price. In that case, he will return to the store to collect a refund.
A PMG store anticipates that if it charges a high price many of its consumers will return to collect refunds. For this reason, it is optimal for the PMG store to actually charge a low price.
Mamadehussene, S. (2018). Price-Matching Guarantees as a Direct Signal of Low Prices. Journal of Marketing Research.
Quarterly Newsletter – 2018:Q2
In the second quarter of 2018, NECEP estimates that GDP increased 0.6% over the previous quarter (0.4% in the first quarter of 2017) and 2.4% year-on-year (2.1% in the previous quarter). This quarterly growth keeps the moderate recovery of the Portuguese economy since 2013, with occasional oscillations as in the first quarter.
Quarterly Newsletter – 2018:Q1
In the first quarter of 2018, NECEP estimates that GDP increased 0.5% over the previous quarter (0.7% in the fourth quarter of 2017) and 2.1% year-on-year (2.4% in the previous quarter). This growth reflects a maintenance of outlook observed since late 2017.
Quarterly Newsletter – 2017:Q4
In the fourth quarter of 2017, NECEP estimates that GDP increased 0.7% over the previous quarter (0.5% in the third quarter) and 2.4% year-on-year (2.5% in the previous quarter). Thus, annual growth in 2017 was 2.7%, the largest since 2000 when it reached 3.8%. The demand components that contributed most to this growth were investment and exports. The former contributed 1.5 percentage points (pp), especially through machinery and equipment. Exports contributed 3.2 pp from industrial supplies, vehicles and services, including tourism.
Quarterly Newsletter – 2017:Q3
In the third quarter of 2017, NECEP estimates that GDP increased 0.8% over the previous quarter (0.3% in the second quarter) and 2.8% year-on-year (3.0% in the previous quarter). This quarterly GDP growth reflects an improvement in economic conditions across the board, including the recovery of investment. There is an unusually high uncertainty to this estimate due to a collection of specific effects.
Quarterly Newsletter – 2017:Q2
Taking into account recent developments, in particular the good performance of the Portuguese economy in the first quarter, the NECEP projects GDP growth of 2.7% in 2017, an upward revision of 0.3 percentage points (pp) from the April estimate. This forecast is involved in a considerable degree of uncertainty due to the combination of calendar effects, high deflators and significant changes in inventories that blur the first quarter data. Thus, it is difficult to extract unequivocal signals from it. The projection results from the cumulative effect of three favourable factors: the stronger growth in the euro zone, the lagged effects of last year's fiscal policy and the clear signs of cyclical recovery of the Portuguese economy. If NECEP estimate materializes, it will be the strongest GDP growth since the year 2000, surpassing the 2.5% observed in 2007.
Quarterly Newsletter - 2017:Q1
In the first quarter of 2017, according to NECEP estimates, GDP increased 0.9% over the previous quarter (0.7% in the fourth quarter of 2016) and 2.7% year-on-year. This quarterly GDP growth reflects an apparent improvement in economic conditions, in particular the recovery of investment and disposable income, which grew by 2.8% last year in real terms. If this estimate materializes, it would be the largest year-on-year growth since the fourth quarter of 2007.