Portugal’s Factories Breathe Easier as Costs Drop 3.3% on Cheaper Energy

Portugal’s industrial price index took another step back last month, sliding for the fifth consecutive time and signalling that the relief firms have been feeling on their cost base is no longer a blip but a trend. The statistical office INE says the overall fall was 3.3 % year-on-year, a slightly deeper drop than in October.

Snapshot: what matters most

• Energy prices tumbled 9.4 %, driving the bulk of the decline

• Intermediate goods became 3.4 % cheaper, easing input costs for factories

• Consumer-oriented products also fell (-2.5 %), hinting at subdued demand

• Investment goods bucked the movement with a 2.5 % rise, underscoring robust capital spending

Cheaper power takes centre stage

Households have felt lower electricity tariffs since autumn, and now the benefits are filtering through factory gates. The index component for energy shaved 1.6 percentage points off the headline figure, the steepest influence by far. Analysts tie the slide to a milder global gas market, the rollout of additional renewable capacity and the gradual end of guaranteed tariffs on legacy generation contracts – all of which compress wholesale electricity quotations.

Relief for manufacturers – and for shop shelves

Portuguese manufacturers who wrestled with soaring bills in 2022–2023 are suddenly enjoying some breathing space. Intermediate inputs, from chemicals to metals, are 3.4 % cheaper than a year earlier; many SMEs in Aveiro’s plastic cluster and Braga’s metal-mechanic corridor say this is restoring profit margins. For consumers the picture is mixed: while factory-gate prices for food and other everyday goods declined 2.5 %, retailers still face higher logistics and wage costs, so shelf prices could take longer to react.

Investment goods refuse to cool

In a sign that companies are not putting expansion plans on ice, the price of machinery, IT equipment and other investment goods climbed 2.5 %. Construction giants see this as evidence that EU-funded projects under Portugal 2030 – from rail upgrades to hospital refurbishments – are cushioning the industrial cycle. The uptick added 0.4 p.p. to the overall index, softening the deflationary headline.

How does Portugal stack up against its peers?

Across the euro area, producer prices have been trending lower since mid-2024, but Portugal’s -3.3 % sits roughly in the middle of the pack: steeper than Spain’s latest -2.1 %, yet milder than Germany’s -4.7 % slump driven by its energy-intensive base. Brussels officials highlight that Iberia’s greater penetration of renewables is helping decouple local costs from volatile fossil fuels, a point Lisbon routinely underscores in EU energy-market debates.

The data economists will track into the new year

While November produced a second sequential dip (-0.1 % month-on-month), forecasters are cautious about calling an outright deflation spiral. Three markers will shape the 2026 outlook:

Gas prices over winter – a cold spell could reverse part of the energy dip.

Private consumption – still growing above 2 %, it could prop up consumer-goods prices despite factory savings.

External orders – Germany’s industrial slowdown is already trimming Portuguese intermediate-goods exports; a rebound would reheat pricing power.Banco de Portugal expects inflation to stabilise near 2 % next year, so any further relief on producer costs could translate into the tamest consumer-price environment since 2020.

Key numbers at a glance

| Component | Year-on-year change | Contribution to headline ||-----------|--------------------|--------------------------|| Energy | -9.4 % | -1.6 p.p. || Intermediate goods | -3.4 % | -1.2 p.p. || Consumer goods | -2.5 % | -0.9 p.p. || Investment goods | +2.5 % | +0.4 p.p. || Total index | -3.3 % | -3.3 % |

The upshot: cheaper energy is pulling down factory-gate prices just as Portugal enters a crucial phase of EU-funded investment. For businesses, lighter input costs could fatten margins; for consumers, the promise is steadier – and possibly cheaper – shelves in 2026.