A sixth straight monthly drop and the fastest leading-index decline since 2008-09 point to Puerto Rico tipping into recession.
Puerto Rico’s economy extended its contraction to a sixth consecutive month, adding to evidence that the island is slipping into a recession, according to the latest Coincident Economic Indicators Index (CEII). Independent economist Ángel Rivera Montañez wrote in the May 2026 report that the latest figures confirm a “transition toward a recessive phase” of the business cycle.
The CEII, which tracks non-farm payroll employment, manufacturing, construction, retail sales and electricity production, fell 0.4% in May 2026 to 109.4 points (2019=100), its sixth straight monthly decline. On a year-over-year basis, the index dropped 1.2% — the steepest annual decline in at least 24 months and the fifth consecutive month of annual contraction, according to the same report, “Evolución y Perspectivas de la Actividad Económica.”
The slide carries fiscal significance: the average CEII value for fiscal year 2026 (July 2025–May 2026) fell 0.5% from the prior fiscal year — the first such decline since fiscal 2020, when the COVID-19 pandemic hit. The drop effectively closes out the economic expansion that began when Puerto Rico emerged from the pandemic recession.
The island’s Leading Economic Indicators Index (LEII), a forward-looking gauge built from unemployment claims, manufacturing hours, oil prices, interest-rate spreads and money supply, fell for a fifth straight month in May, down 0.5% to 104.2 points. Its six-month growth rate stands at -1.1%, which the report describes as the sharpest deceleration since the 2008-2009 financial crisis, excluding the disruptions caused by Hurricane Maria and the pandemic.
The report’s recession-probability model, which weighs the duration, diffusion and depth of the downturn, is described as showing conditions “compatible with an imminent or developing recessionary episode” — the first such signal in 16 months, as first noted in April’s report.
The report ties the downturn to the escalation of the conflict in Iran and the broader Middle East, which drove up oil and commodity prices, disrupted global trade and dented consumer and business confidence. Construction and manufacturing — sectors whose ripple effects typically sustain broader economic momentum — have posted consecutive declines, while the labor market has lost steam as a stabilizing force. Persistently high prices for goods, services and energy have also eroded consumer confidence and weakened household spending, the report says.
Every monthly report since January has recorded a deepening slide: a second consecutive monthly decline in January, a third in February, a fourth in March, and a fifth in April, when recession warning signals first appeared. May’s reading confirmed the pattern across all six sectors tracked, with only non-farm employment contributing positively to the coincident index.
Despite the grim trajectory, the report projects the coming downturn will be “short in duration,” though it warns of a subsequent period of structural stagnation tied to long-standing constraints in Puerto Rico’s productive capacity, institutional rigidities and adverse demographic trends. The report calls for “highly selective” and “strategically focused” economic policy, alongside pending structural reforms, to cushion the impact and restore sustainable growth.
