Puerto Rico economy slows, but local labor market, equities show resilience
Birling Capital, Puerto Rico economy, Global Market Square, labor market, stock index, Popular Inc., Evertec, First Bancorp, OFG Bancorp, Francisco Rodríguez-Castro, Puerto Rico unemployment, Puerto Rico contraction, economic activity index, GDPNow, inflation, Federal Reserve, TLT, cryptocurrency, investor confidence,
Puerto Rico’s economy showed signs of contraction in May, but the island’s labor market and publicly traded companies continued to display resilience, according to Birling Capital’s Global Market Square Monthly Review.
The firm reported that Puerto Rico’s Economic Activity Index declined 0.9% year-over-year, marking the sixth consecutive month of negative growth. The contraction was driven by lower consumer spending, reduced manufacturing output and cutbacks in government expenditures.
Despite the slowdown, the island’s unemployment rate fell to 5.5% in April, the lowest level in nearly three years. Birling Capital pointed to job gains in hospitality, health services and transportation as key contributors, noting the divergence between labor market strength and overall economic performance.
“Puerto Rico’s labor market remains surprisingly resilient,” the report stated, describing the contrast as evidence of a complex and evolving economic environment.
The review also highlighted the performance of Puerto Rico-based public companies through the first five months of 2025. Popular Inc. gained 10.58% year-to-date, followed by First Bancorp at 7.21% and Evertec Inc. at 4.14%. OFG Bancorp declined 2.43% in the same period. Collectively, these results lifted the Birling Capital Puerto Rico Stock Index by 6.02%.
“Financial institutions benefited from higher interest margins and stable credit quality,” the report noted. It also credited Evertec’s gains to continued digital expansion in the Caribbean and Latin America.
Meanwhile, U.S. equity markets posted strong gains in May, led by technology stocks. The Nasdaq composite rose nearly 10% for the month, and all major equity styles delivered positive returns, with large-cap growth outperforming.
The firm described a growing divide between market momentum and consumer sentiment. The University of Michigan’s index fell to its third-lowest level on record, weighed down by concerns over housing affordability, persistent costs of living and interest rate uncertainty.
“This paradox highlights a growing divide between Wall Street and Main Street,” the report stated.
Macroeconomic indicators in the U.S. were mixed. The Federal Reserve Bank of Atlanta’s GDPNow model revised its second-quarter growth forecast sharply upward from 2.4% to 4.6% between April 30 and June 2. Inflation data improved slightly, with both headline and core personal consumption expenditures (PCE) coming in below expectations, according to the Cleveland Fed’s Nowcasting model.
Fixed-income markets reflected increasing investor confidence, as yields rose and the yield curve steepened. The 10-year U.S. Treasury closed May at 4.41%, while the 30-year climbed to 4.92%, its highest level in months. Rate-sensitive long-duration bond exchange-traded funds (ETFs), including the iShares 20+ Year Treasury Bond ETF (TLT), declined 3.2% for the month.
Commodity markets delivered mixed results. Gold stabilized following a months-long rally, while cryptocurrencies posted strong gains amid renewed institutional demand and clearer regulations in key jurisdictions.
Looking ahead, Birling Capital emphasized that Puerto Rico’s long-term growth will depend on converting labor market progress into broader economic momentum. The firm said its outlook considers credit conditions, market behavior and private-sector investment to offer a more dynamic projection than public forecasts.
“Growth opportunities exist in technology, semiconductors and cyclical sectors. Fixed-income investors must manage rate volatility. In Puerto Rico, the priority is converting labor strength into broader growth,” said Francisco Rodríguez-Castro, president and chief executive of Birling Capital, who authored the report. He added that selective optimism continues to guide investor strategy.
