Fuel Does Almost All of It: Portuguese Inflation Returns to 3.3 Percent in August

Portuguese consumer prices were 3.3 percent higher in August than a year earlier, according to the flash estimate the Instituto Nacional de Estatistica (National Statistics Institute, or INE) published on Monday. That is three tenths of a point above July, and it reverses two months of easing. The statistics office is unusually direct about the cause: the acceleration is, in its words, almost entirely explained by the rise in fuel prices.

Strip the volatile items out and very little moved. Core inflation, the index excluding unprocessed food and energy, came in at 2.7 percent against 2.6 percent in July, a tenth of a point. Unprocessed food actually decelerated, to 3.4 percent from 3.7 percent. Processed food went from 1.4 to 1.5 percent. The energy index is where the jump lives: 12.2 percent year on year, up from 8.7 percent a month earlier.

One number doing all the work

The month-on-month reading tells the same story from a different angle. Prices rose 0.1 percent between July and August. That sounds trivial until you set it against the two comparison points INE supplies: July itself was minus 0.5 percent, and August 2025 was minus 0.2 percent. August is normally a month when the Portuguese price level falls slightly. This year it did not, and the year-on-year rate widened as a result.

The twelve-month average, the smoothed figure that matters for a range of indexation formulas, edged up to 2.7 percent from 2.6 percent. On the harmonised measure used for European comparison, the Indice Harmonizado de Precos no Consumidor, Portugal registered 3.6 percent against 3.1 percent in July, with harmonised energy prices up 13.5 percent.

Why fuel, and why now

Brent crude returned to around 90 dollars a barrel over the second half of August as hostilities between the United States and Iran resumed, and Portuguese pump prices followed. The state has been absorbing part of that through the extraordinary discount on the Imposto sobre os Produtos Petroliferos e Energeticos (Tax on Petroleum and Energy Products, or ISP), which widened twice during August to its deepest level of the month on 24 August.

That cushion is now being partly withdrawn. As we reported at the weekend, Portugal clawed back part of the ISP discount from Monday 31 August, on the government's expectation that underlying prices would fall anyway. The August inflation figure was compiled before that change took effect, so whatever the ISP adjustment does to prices belongs to the September reading, not this one.

The number quietly deciding next year's rents

Buried in INE's table is a line most coverage skips. The index excluding housing recorded a twelve-month average variation of 2.56 percent to August. That series, over exactly that twelve-month window ending in August, is the input from which the annual rent-update coefficient is built under the Novo Regime do Arrendamento Urbano (New Urban Lease Regime, or NRAU).

In early August, working from the data available then, we put the 2027 coefficient on track for about 2.5 percent. The August flash nudges that arithmetic marginally higher. Two cautions apply. The flash is built from data validated only up to two days before publication and INE states plainly that estimated values may not match the definitive ones. And the coefficient itself is not this number: it is calculated by INE from definitive data and published separately. The definitive August index lands on 10 September, which is when the figure firms up.

What this means for expats

• If you drive, you have already felt this: the entire acceleration sits in the fuel tank rather than in the weekly shop, and the ISP discount that softened it narrowed on Monday.
• If you rent, watch 10 September: the definitive index sets the base for the 2027 rent coefficient. Our tenant guide sets out how the annual update is applied to an existing contract.
• If you save, the gap has widened: at 3.3 percent inflation, the 2.50 percent ceiling written into Certificados de Aforro Serie F leaves savers further behind, a squeeze we set out when the Euribor overtook that ceiling.
• Do not use this figure in a contract: INE states explicitly that flash estimates cannot be used to update values under contracts or in disputes. Wait for the definitive release.
• Next dates: definitive August data on 10 September; the September flash estimate on 30 September.