Puerto Rico Economic Pulse ©

August 2014: Has PR’s Recession Changed Consumption?

Understanding consumption patterns during this recession

A serious particular effect of severe downturns is that declining consumer spending, itself a reaction to the economy’s contraction, also undermines the prospects for recovery. In worst cases, a prolonged and deep plunge in consumption reinforces production driven recessions entering in a negative spiral. This takes place in closed economies, such as the US, where a significant number of consumer goods are produced in the mainland. Consumption is, in other words, a fundamental determinant of business cycles. Consumption is also a measure of the set of socioeconomic conditions that underlie consumer behavior, such as job opportunities, migration, price fluctuations, access to credit, and financial stability. The level of uncertainty in the PR economy and society is currently high. There is nothing to indicate that the current crisis will change quickly. How does the PR consumer behave in times of recession? This issue analyzes the impact of the ongoing recession on household consumption, effects, and threats for the future.