Portugal PMI Reaches 17-Month High

Portugal’s composite Purchasing Managers’ Index (PMI) climbed to 52.2 in October, its highest reading since mid-2024, marking a clear return to expansion after a year of industrial contraction. Services drove the recovery, powered by steady tourism inflows, rising financial activity, and renewed public investment. Manufacturing output, though still subdued, showed the first signs of stabilisation after 14 consecutive months of decline — an encouraging signal that the post-pandemic adjustment cycle may be ending.

Headline inflation slowed to 2.4 percent year-on-year (core 2.1 percent), aligning closely with the European Central Bank’s target. The euro (EURUSD 1.09) strengthened modestly, while Brent crude (CL=F ≈ US$ 81) held stable, easing imported-energy costs. Equity sentiment improved accordingly: the PSI20 Index rose 0.4 percent, with gains concentrated in consumer, utilities, and banking stocks.

Economists now expect Portugal’s GDP to expand by around 2 percent in 2026, supported by Eurozone demand and improving credit conditions. Yet structural headwinds remain. Private-sector leverage, low productivity growth, and tight labour-market capacity could limit medium-term competitiveness. With public debt still hovering near 95 percent of GDP, fiscal discipline is critical to retaining investor confidence and preventing upward pressure on yields.

The government faces a narrow policy window to convert cyclical momentum into sustainable growth. Analysts argue that accelerating reforms in skills development, innovation ecosystems, and export diversification will determine whether this recovery matures into a productivity-driven expansion. Without deeper structural change, the economy risks slipping back into low-growth equilibrium once external demand plateaus.