Puerto Rico’s economy gains momentum as indicators show steady growth
Puerto Rico’s economic performance in May showed renewed strength, according to the latest Economic Cycle Indicators report, which highlighted continued gains in both the Coincident Indicators Index (IIC, in Spanish) and the Leading Indicators Index (IIA, in Spanish).
Despite ongoing uncertainty in fiscal and trade policy, the economy posted positive results for the third consecutive month, signaling an upward trajectory, according to economist Ángel Rivera-Montañez.
“With the first half of 2025 almost over, the analysis has confirmed the lack of compelling evidence of a sharp decline in economic activity leading to a short-term recession,” Rivera-Montañez said. “Meanwhile, the level of uncertainty has remained high, prompting changes in economic scenarios and projections, particularly for the second half of 2025.”
The IIC rose 0.1% from April to reach 111.9 (base 2019 = 100), a 1.5% gain from May 2024. For fiscal year 2025 (July–May), average growth stood at 0.8%, while calendar year growth (January–May) reached 1%. Although slower than in previous years, both figures still reflect forward momentum.
Growth in May was driven by nonfarm payroll employment, the coincident manufacturing index and the construction sector. Retail sales and electric power generation, however, weighed on the index, pointing to continued strain on consumers and the energy system.
The IIA posted a 0.6% monthly increase — the largest in at least two years — and a 1.7% year-over-year gain, marking eight straight months of annual growth. The IIA Diffusion Index rose to 74.1, while the IIC Diffusion Index came in at 65.2. Both surpassed the 50-point expansion threshold, signaling improving conditions and a lower probability of recession in the short term.
Although initial unemployment claims have edged up recently, the labor market remains stable. Manufacturing work hours are still above the 12-month average, and purchasing manager expectations remain optimistic. The Puerto Rico Purchasing Managers Index (PR-PMI) stayed above the 50-point expansion threshold for the fifth straight month.
Stable fuel prices and steady monetary supply have helped maintain economic balance. Inflationary pressure has stayed under control despite global trade tensions and instability in the Middle East, supported by reduced energy demand.
Risk factors persist
The report warned, however, that risks remain. These include possible cutbacks in public and private spending, tighter monetary policy, high interest rates, external price shocks and the unresolved fiscal issues at the Puerto Rico Electric Power Authority. A decline in personal consumption could also dampen future growth.
The Coincident Manufacturing Index (ICM, in Spanish) rose for the third month in a row, reaching its highest level in three years. The increase was attributed to improved export outlooks, higher average weekly wages in manufacturing and longer work hours. Industrial energy use also began to recover after months of decline. Growth was particularly strong in high-tech industries.
Rivera-Montañez emphasized that composite indices — which aggregate employment, wages, exports and energy data — remain vital tools for tracking economic trends and shaping policy.
“Analyzing a single indicator alone does not provide the necessary capacity to determine the economic status; for this purpose, composite indices are the best available tool and are easy to interpret,” he said. “The creation of the IIC and the IIA adds value to the process of analyzing and creating public and/or economic policies.”
Puerto Rico’s economic cycle indicators have reliably identified past recession and recovery points. First used internationally in the 1950s, composite indices are now widely adopted to monitor short-term economic changes.
