Puerto Rico Compass ©

Q2 2011: Are We Heading into Recovery?

An analysis of 2nd Quarter economic indices in PR

Fiscal discipline has led to a very disappointing performance of all economic sectors, including the government. The second quarter economic indices suggest that the process of recovery is still a long way. During this quarter, manufacturing, construction, and banking continued to pull the outlook of the leading index. On the other hand, some mild gains in employment levels improved the coincident and consumption indices. We face some tough balancing acts among growing tourism, stagnant manufacturing, stale construction, a cautious consumer, and a healing banking sector. Puerto Rico still faces tough headwinds ahead not only internally but also externally with the US debate on its debt ceiling and potential default. What has been learned so far? Fiscal deficits can be cured with a medium-term plan for deficit reduction but cutting back spending viciously in the short term at a time of private-sector retrenchment has been a mistake.