Puerto Rico Compass ©

Q1 2015: Is Consumption Puerto Rico’s Lifeline?

A review of economic indices Q1-2015

Recently released data showed that real GNP in Puerto Rico fell -0.9% in fiscal year 2014. This result was more or less in line with the consensus forecast, and it represents a continuation of a recession, which started in 2007 and has lasted now 8 years. The underlying details of the six quarterly economic indices for Q1-2015 were mixed, however. The good news is that growth in the leading index reflects the impact of cheap oil prices with lower gasoline and electricity prices expected to continue in coming months. In addition, consumption of goods and services was less negative than the previous quarter. On the other hand, construction continued in negative territory with -7.6 percent on a year-ago basis. Banking and manufacturing have not improved and continue in negative territory. Overall, the economic indices for Q1 this year reflect the poor performance of the economy and the uncertainty generated by an upcoming overhaul of PR’s tax system with a proposed VAT tax of 16%. At time of publishing this issue, the Legislature had defeated this bill.