Markets, Business & Tech Briefing: PSI Posts Its Best Month Since February, Rents Can Rise 2.56% Next Year, State Surplus Falls to €282 Million

Your Rent Can Rise 2.56% in January, and the Number Was Set This Morning

The Instituto Nacional de Estatística (National Statistics Institute) published its flash inflation estimate for August on Monday morning, and buried inside it was the figure that will land on Portuguese rent contracts on 1 January 2027. The twelve-month average of the consumer price index excluding housing, which is the series the law uses to build the annual rent-update coefficient, came in at 2.56%.

That is the ceiling, not the obligation. From 1 January landlords may raise a rent by up to 2.56%, and many will not, particularly where a tenancy is recent and the contracted rent is already at the top of what the local market bears. But the arithmetic for those who do is straightforward and worth having in front of you now rather than in December. A rent of 800 euros can go to 820.46 euros. A rent of 1,000 euros can go to 1,025.60 euros. Across a year that is 245.52 euros and 307.20 euros respectively.

The comparison that matters is with the current year. The coefficient applied from January 2026 was 2.24%, which we set out in April. So next year's permitted increase is about a seventh larger than this year's, and it arrives after two years in which the coefficient had been falling from the post-energy-crisis peaks. The direction has turned.

The reason it turned is the same reason the headline number made news separately on Monday: fuel. Portuguese inflation accelerated to 3.3% in August, three-tenths of a point above July, and the energy component jumped to 12.2% from 8.7%. We covered the headline read this morning, and the mechanism is the point here: the rent coefficient strips housing out of the basket, but it does not strip out the diesel that moves everything else in the basket, and it averages over twelve months rather than one, which is why it lands well below the 3.3% headline while still rising.

Two caveats belong on this. The 2.56% comes from a flash estimate, so it will be confirmed when INE publishes the definitive August index in the middle of September, and the coefficient itself only becomes operative when it is set out in an official notice in the autumn. And it sits on top of a rental market Parliament is currently rewriting: the overhaul that would, among much else, unfreeze Portugal's oldest rents on the death of a tenant is still in committee. A 2.56% ceiling on an updated contract and an unfrozen 1960s contract are very different events for the household on the receiving end.

The State's Surplus Is an Eighth of Last Year's, and the Health Service Explains Almost All of It

Portugal's public accounts came back into surplus in the year to July, and the size of that surplus is the story. The budget-execution summary from the Entidade Orçamental (Budget Entity) puts the general government balance at 281.7 million euros in public-accounting terms for January to July, against 2,321.8 million euros in the same seven months of 2025. That is a fall of 2,040.1 million euros, and it follows three consecutive months in deficit.

Before anyone reads a fiscal deterioration into that, the government's own explanation is specific and largely checks out: the Serviço Nacional de Saúde (National Health Service) has been paying down overdue supplier debt with the capital injections it was given for exactly that purpose, and those payments totalled 1,426.4 million euros through July against just 166.7 million euros a year earlier. Strip that effect out and the balance would be a surplus of 1,708.1 million euros, down 780.4 million on 2025. Two smaller drags also sit on the revenue side, both storm-related: moratoria and the exemption from the Taxa Social Única (Single Social Contribution) granted to companies hit by the winter storm sequence.

The underlying shape is a government spending faster than it is earning, but not dramatically so. Adjusted expenditure rose 8.8% against revenue at 7.4%. On the revenue side, non-tax and non-contributory receipts grew fastest at 18.7%, driven by transfers (22.3%), property income (29.3%) and a 47.6% jump in the residual bucket. Tax revenue rose a more modest 4.2%: IVA (value-added tax) 6.8%, IRS (personal income tax) 5.7% and IMI (municipal property tax) 22.7%, against a 2.4% fall in IRC (corporate income tax). Social contributions grew 6.7%, with Segurança Social (Social Security) contributing 7.3%.

On the spending side, primary expenditure excluding the SNS regularisations rose 8.7%. Transfers were up 7.2%, mostly pensions in both the general Social Security regime and the Caixa Geral de Aposentações (the civil-service pension scheme), plus a larger monthly instalment on Portugal's contribution to the EU budget. Personnel costs rose 6.2%.

The line worth flagging for readers who follow the recovery plan is investment, up 40.4%. The summary attributes it to central-administration bodies, and specifically to higher-education institutions spending PRR money on student housing and on business capitalisation and innovation, to CP's payments for new rolling stock under the railway rolling-stock investment plan, and to housing and building rehabilitation at local-government level. That is what the last weeks of a recovery plan look like inside a monthly accounting statement. Portugal's 22 billion euro plan ran out of calendar today, and the spending spike in July is part of the reason the final execution figure will look better than the 75% it carried into August.

July's Tourism Growth Came From the Portuguese, Not the Foreigners

INE's flash tourism estimate for July, also out on Monday, counts 9.6 million overnight stays in Portuguese tourist accommodation, up 2.1% on July 2025, from 3.4 million guests (up 1%). Revenue reached 923.7 million euros, up 4.9%, which is the familiar recent pattern: money growing about twice as fast as beds.

The split underneath is the interesting part. Resident overnight stays rose 5.1% to 3.1 million. Non-resident stays rose 0.7% to 6.6 million. In the peak month of the year, in other words, essentially all of the growth in Portugal's tourist accommodation came from Portuguese people, and the foreign market was close to flat. That is not a one-month artefact: foreign overnight stays actually fell in June, and second-quarter growth had already cooled to 1.2%. July is a recovery from June's dip rather than a return to the old trajectory.

Pricing did the heavy lifting. The average daily rate reached 154.9 euros, up 3.2%, and revenue per available room reached 104.3 euros, up 1.8%. The average stay lengthened slightly to 2.83 nights. Regionally, Alentejo led on 7.7% and the North on 6.3%, both of which are markets where the domestic visitor weighs heaviest; the two island regions went backwards, the Azores by 1.2% and Madeira by 0.9%.

For an industry that has spent two years being told to pivot from volume to value, a July in which the rate rose 3.2% while foreign beds rose 0.7% is close to the textbook version of that pivot. Whether it is a strategy or simply what a saturated market does on its own is the question the sector will argue about through the autumn.

Lisbon Closes the Best August Since the Iran War Began

The PSI finished the last session of August up 0.07% at 9,437.18 points, which is as close to unchanged as an index gets, and it managed even that only because Galp Energia rose more than 2%. Of the sixteen constituents, four closed higher, eleven closed lower and REN was unchanged at 3.51 euros. Lisbon was the exception in Europe: the German DAX fell 1.17%, the French CAC 40 fell 0.79% and the Spanish IBEX 35 fell 0.34%, with only the British FTSE 100 also positive at 0.29%.

The reason Galp was carrying the index is the same reason the rest of Europe was falling. Brent crude rose 1.98% to 89.84 dollars a barrel and West Texas Intermediate rose 1.7% to 84.82 dollars, after United States forces struck rocket launchers on Iran's Larak island in the Strait of Hormuz. A refiner and producer gains on that; almost everything else in an energy-importing continent loses. Portugal happens to run an index heavy enough in Galp for the arithmetic to come out positive.

The month is the better story. The PSI gained 3.45% in August, its strongest month since February, when it jumped more than 7% as the conflict between the United States and Iran opened. Six months on, that conflict has moved into a new phase with Washington's announcement last week of an economic isolation campaign against Tehran, and Lisbon has again been among Europe's better performers: the DAX added more than 2% over the month, the IBEX just over 1%, the CAC lost nearly 2%, and the pan-European Stoxx 600 managed 0.31%.

Among the heavyweights, Galp, BCP and EDP each climbed more than 5% across August, Jerónimo Martins added 3.5% and EDP Renováveis 2.8%. The best performers were smaller: Ibersol and CTT both gained more than 7%, and Corticeira Amorim 6.8%. Only three stocks in the index finished the month down: Teixeira Duarte, Sonae and Altri. The PSI enters the final four months of 2026 up about 14% for the year, against roughly 10% for European equities as a whole. That is a wide gap, and it has been built largely on banks, energy and a dividend yield that still screens well against the rest of the continent.

Bonds, the Bund and the Euro

Portugal's ten-year yield rose four basis points on the session to 3.68%, leaving it 19 basis points higher over the month and 48 basis points above where it stood a year ago. The German ten-year Bund rose five basis points to 3.32%, up 17 basis points on the month and 57 over the year, and it continues to trade around levels it had not seen since 2011. The spread between the two closed at roughly 36 basis points, effectively unchanged on Friday and still remarkably narrow by any historical standard for Portuguese debt.

It is worth being clear about what that narrowness now means. A 36 basis point spread is a compliment to Portugal's credit, but it is being paid in an environment where the anchor itself keeps moving: the reason Portuguese borrowing costs are up 19 basis points this month is almost entirely that German ones are up 17. Lisbon is not being repriced. It is being carried.

The euro weakened. The European Central Bank's reference rate closed at 1.1596 dollars, against 1.1643 on Friday, a fall of about 0.4% on a day when oil rose and German inflation accelerated to 2.9%. For Portuguese importers that is a small squeeze on dollar-denominated energy on top of the crude move itself; for exporters into the United States it is a small help.

Tomorrow

Two rule changes land on Tuesday. The rewritten ride-hailing law comes into force, letting licensed taxis register to operate as TVDE vehicles on platforms such as Uber and Bolt, subject to the platforms offering it and operators choosing to take it up; the same law carries the 25% ceiling on platform commission that we covered when the text reached the Diário da República, and the taxi associations have said they will take it to the Constitutional Court. Decreto-Lei 171/2026 also takes effect, cutting the minimum free float for a Euronext Lisbon listing from 25% to 10% and lifting the prospectus exemption threshold from 8 million to 12 million euros, which is the most consequential thing anyone has done to the plumbing of the Lisbon market in years.

The government is also due to receive Parpublica's report on the TAP bids on Tuesday, a day after the airline disclosed a half-year loss of 99.2 million euros. Expect the market to read the two together. With oil back above 90 dollars and the Hormuz risk premium live again, Galp remains the swing factor in a Lisbon index that has just had a very good month for reasons it did not choose.