Puerto Rico Economic Pulse ©

May 2009: Bumpy Ride for Auto Dealers

New auto dealers face challenges in Puerto Rico

Auto retail sales during the past ten years have closely followed prevailing financial conditions and the economy’s cycle. During the first half of the decade, credit conditions were relaxed, the PR economy and new auto sales expanded, reaching a record 140,401 units in 2005. Since then, the economy began to, first, decelerate and, then, contract since mid 2006. With the onset of the US financial crisis, credit conditions grew progressively tighter. Consumers became increasingly aware of risk, a gloomy job outlook, and the car market began its downward trend. Four years after posting record sales, the market forecast is half its sales in 2005. Find out what happened and what auto dealers are facing.

Puerto Rico Economic Pulse ©

April 2009: The House of my Dreams

The slump in Puerto Rico’s housing market

Housing has always been at the forefront of the PR economy. Together with the public sector, housing became a powerful engine that kept the economic machine working over the past fifteen years.  Now, with housing trapped in one of its worst slumps ever, the story is quite different. Construction is shedding more and more jobs and the bleeding has not stopped. Thousands of housing units remain empty across the island. The affliction of the housing sector has spread to the rest of the economy, including banks, mortgage bankers, realtors, and many other companies. This is not the first time housing goes astray in Puerto Rico. Past lessons were forgotten and there is still a lot to learn from this crisis. This issue analyzes some of the causes and draws valuable lessons for the future.

Puerto Rico Compass ©

Q1 2009: Tracking Puerto Rico’s Economic Scorecard

Quarterly economic indices tell the story

During the first quarter of 2009, the newly elected government announced huge fiscal deficits and an urgent need to reduce public expenses. Federal and local stimulus plans were approved with the hope of restoring growth in the short run. The administration announced a reduction of 30,000 jobs starting in fiscal 2010. This measure is recessionary and will worsen unemployment, which reached 14.1% during February. How long will the recession last? This will depend on the effectiveness of the recovery plans and on what sectors investment flows while at the same time, consumers recover confidence on the island’s economic future. How the US economy performs, as well as local sectors, such as, construction and banking are the clue to finally register positive growth.

Puerto Rico Economic Pulse ©

March 2009: Puerto Rico’s Economy in a Balancing Act

Performance of the PR and US economies in fiscal 2008 and forecasts to 2011

An era of fiscal deficits and oversized government may be ending but how long will it take the PR economy to regain healthy growth without the help of the US? With the world economy in its worst crisis in 70 years, every country needs to do its bit to rekindle global demand. President Barack Obama and his economic team are already racing against the clock to try and fix the US economy with trillion-dollar programs. The forecast for the US economy is recession in fiscal 2009 and 2010. Locally, Governor Fortuño is implementing a $500 million Criollo Plan, but trying to eliminate a $3.2 billion deficit in the short term may deepen the island’s recession. Under these conditions, PR’s recovery is like running into a 40-mile-an-hour headwind. Hard choices are still ahead.

Puerto Rico Economic Pulse ©

February 2009: Is There a Rescue Plan at the Helm?

Policy Options and Economic Growth

The Puerto Rico economy, once again, finds itself at a crossroad. This time, however, the decisions adopted could have deep and lasting consequences and will depend on four issues.  First, how much of Puerto Rico’s appropriated funds under the $787 billion federal economic stimulus package, an estimated $5.0 billion, can be spent under local discretion. Secondly, the government’s fiscal accounts continue to be in an extremely delicate situation.  The cash-flow deficit in fiscal 2009 is staggering. The third issue is the government’s willingness, and political clout, to significantly cut fiscal spending, particularly to reduce the government payroll. Finally, no long-term economic development initiative has yet been put forward. Find out how these policy questions will determine output growth in Puerto Rico in the short and medium term.

Puerto Rico Economic Pulse ©

January 2009: Has the Shopping Frenzy Halted?

An analysis of the Retail Sales Market in PR

The economic downturn in the US is halting growth in the rest of the world. This negative shock has affected adversely consumption and retail sales in the US mainland. PR is in its 3rd year of recession but retail sales appear not to have performed as negatively as in the US. Consumers in the island appear to be resilient and some retailers have expanded while other new retailers have started operations in the island. Credit tightening adversely affects consumer spending so this must be resolved if retail sales and consumption are to resume growth in the short run. Find out what happened to retail sales during fiscal 2008 and what is forecasted for fiscal 2009 and 2010. The presence of certain megatrends provides important insights about the changing Puerto Rican marketplace.