Puerto Rico Compass ©

Q1 2010: Curb your Enthusiasm

An analysis of 1st Quarter 2010 economic indices in PR

At the start of 2010, many were hoping to leave behind the longest recession in recent history in Puerto Rico. During the 1st Q of 2010, there are some signs of improvement in consumption, but we hasten to add that there are many structural problems that still worry us. Some of these bewildering trends include: the situation of the banking industry, the island’s huge public debt, a troubled PR Retirement System, and a low labor participation rate, among others. Consumer and producer sentiments do impact economic activity so perceptions are just as important as hard-core economic data. In this context, clear and credible economic policies adopted by the public sector can play a leading role in economic recovery in PR. This issue examines how recent developments both in and outside Puerto Rico have impacted the HCCG indices and how upcoming events could influence the economy in the near future.

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Q4 2009: US Recovers, But What About Puerto Rico?

An analysis of 2009 Q4 economic indices in PR

A lackluster 2009 is over. Global growth fell from 3.0% in 2008 to –1.1% in 2009 –the first outright decline of world GDP since the IMF began collecting the data in 1970. The recession in the US appears to have ended by Q4 of 2009. The key issue now is the shape of the impending recovery. There is an alphabet of possibilities. The pessimists fear a “W,” or perhaps an “L,” where the economy simply bounces along the bottom for a while. The optimists say the US economy typically bounces back robustly with a “V-shape.” The consensus seems to expect a solid, but less spectacular “U-shaped” recovery. In contrast, there is no recovery yet in Puerto Rico. The forecast is a more feeble “U-shaped” recovery. Structural issues in our economy, an unclear growth strategy, and ongoing banking problems are part of the problem. On the bright side, unemployment and car sales portrayed some improvement at the end of the quarter. Find out how other indicators performed in Q4 of 2009.

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Q3 2009: Time Is Running Out for Recovery

Economic indices in Q3 in PR confirm a trend

Stimulus programs provide some relief to deal with the sharp downturn in PR. The federal program CARS (Car Allowance Rebate Program) or cash for clunkers, boosted auto sales in the island but only during August. However, this growth is not sustainable in coming months. Our quarterly indices continue to be negative. The positive effects of ARRA (American Recovery and Reinvestment Act) and LSP (Local Stimulus Plan) are as yet unobserved. Only 18% of the federal stimulus and 5% of the local stimulus have been disbursed. Fixing the $3.2b government deficit has required bitter medicine, including payroll savings, reduction in operational expenses and contracts, as well as government health plan savings, among others. This led to $1.2 million in savings as of October. Come November 6 of this year, 21,807 public employees will lose their jobs. Time is running out for government and the private sector to start the recovery.

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Q2 2009: Is the Worst over for Puerto Rico’s economy?

The good and bad news of the economic indices

During the first six months of this year, the PR economy posted negative numbers. How long will this last? Will recovery start soon? Governor Fortuño’s economic proposals combined with President Obama’s American Recovery Plan are expected to finally spur growth in the island but it will take time. Construction is still in recession but hopefully not for long. Manufacturing is also stalling and losing jobs. Banking is positive but close to zero growth. Overall, the consumer and the economy have posted negative results. The leading index does not augur a quick turnaround. The problem for the local government will not be a lack of money to increase investment and boost the economy. Instead, the challenge is how efficient, effective, and fast will it do it.

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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.

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Q4 2008: Every Sector Takes a Beating

Economic indices in Q4 tell the story the PR economy

Puerto Rico is in its third year of an economic recession. The current economic crisis is worldwide with a financial crisis that has not been resolved. As the mortgage market failed and many financial systems were rescued by government intervention, consumers and investors were less willing to spend and invest. Our consumer has also turned more cautious and thrifty. Gasoline and electricity bills have taken a big bite out of household budgets. Consumption is restricted and credit constraints are tightened. All economic sectors in PR, including banking, manufacturing, and construction have taken a beating and are struggling to charge ahead. As 2008 ended, a new governor was elected and together with a new team, Puerto Ricans hope to resolve the fiscal crisis and avert more unemployment.

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Q3 2008: Collapse in the Financial Markets

Quarterly economic indices analyze the PR economy

The financial system throughout the world is on the brink of disaster. A downturn in the US economy plus an unregulated derivative market related to housing has caused failures in financial markets globally. For many, a future recession is imminent. How did this occur? Business and individuals had a positive outlook on the US economy. A housing bubble emerged and mortgage credits were provided to people who could otherwise not afford the units they bought. This speculative housing bubble started a boom in the construction sector. The bubble finally burst. Banks were less liquid than before. A credit crunch halted the boom and contaminated the rest of the global financial system. The collapse has just started. Financial bailouts by governments have been approved but it is yet too early to determine if they will succeed. Against this background, where is the Puerto Rico economy headed?

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Q2 2008: A Second Quarter Meltdown in Puerto Rico

Quarterly economic indices tell the story

Puerto Rico’s second quarter has been characterized by media news regarding bankruptcies, food and gasoline price spikes, foreclosures, car repossessions, unemployment, companies leaving Puerto Rico, and job losses. Construction continues to pull the economy downwards while a cautious banking sector continues to tighten credit. This credit crunch halts consumer expenditures and investment. Meantime, local politicians engage in Byzantine debates in order to win the next election rather than suggest and find the means to finance countercyclical economic policies. We have relied on relief from the federal government and the Federal Reserve. It is time for us to lend them a hand and leave this trough.

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Q1 2008: Living in Recessionary Times

If our six economic indices were alarm lights, we would have five red lights blinking. The worst performances occurred in the construction and consumer indices. This last indicator is worrisome since consumption is a big chunk of GDP and affects directly other sectors. An economy in recession, high-energy prices, and job losses plus the uncertainty generated by an upcoming election are some of the causes. Find out what measures have been taken by consumers to mitigate recessionary effects, how Fed interest rate cuts could generate some relief for investors, and what positive factors need to take place in order to overcome this recession, which refuses to disappear in coming months.

Puerto Rico Compass ©

Q4 2007: When Will the Recovery Begin?

As discussed in the previous Compass, the HCCG Coincident Index showed a continuation of the recession that started in Puerto Rico since Q3 2006. The last quarter of 2007 depicts negative figures again, but the magnitudes have improved in most of the indices. The leading index dropped in Q4, and the banking index depicts timid growth. Find out how tourism and exports bring hope; how the Puerto Rican consumer survived the holiday season; and what issues concerned households at the end of 2007. A closer look at these indices will indicate how this election year affects the economy and addresses the question that concerns all of us: when will the recovery begin?