Puerto Rico Compass ©

Q1 2012: Is Consumption Coming Back?

An analysis of 1st Quarter 2012 economic indices in PR

Since 2009, Puerto Rico has attempted to regain fiscal sustainability and market confidence. We have been staring into the headlights of a protracted economic recession without gradually realigning our economy to a sustainable position of economic growth. Despite high levels of unemployment and bankruptcies, there are signs that consumption may be coming back. Consumer expenditures run at about 90% of GNP in Puerto Rico, so consumption growth will play an important part in determining the pace of PR growth. This issue presents an analysis of HCCG’s economic indices for the first quarter 2012, with particular emphasis on consumption. Has consumption recovered to pre-recession levels of 2006? How have different components of consumption performed? How long is the path to complete recovery? Also, find out how other indicators, such as construction, have also posted positive growth during this quarter.

Puerto Rico Compass ©

Q4 2011: Charting the Year in Puerto Rico

What the economic indices tell us in 4th Quarter 2011

Nowadays, recovery is the most wanted outcome in the US and PR. Usually, signs of early growth show up in consumer spending, housing, and construction. This time around, these sectors have been the last to recover in the US. Instead, the US economy is showing signs of recovery on the production side. Manufacturing and business investment have led the way, driving down the unemployment rate. For some economists, that improvement may finally lead to improved consumer spending in the US. The relevant question for us is whether PR shows signs of a production side recovery or if trends in consumer spending, housing, and construction in the island speak of a consumer side recovery? HCCG’s indices for the 4thQ can provide some answers and chart the performance of CY 2011.

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Q3 2011: We Are Not There Yet

An analysis of 3rd Quarter 2011 economic indices in PR

Puerto Rico’s third quarter indices reveal a mixed picture. The economy is not yet out of recession but there are some positive signs. However, there are already rumors of another recession brewing in the US as a result of the unresolved debt hangover in Europe and its efforts to save Greece and the continent’s debt-burdened banks. Still, the idea that the island has hit bottom is a possibility but, as we have indicated in prior issues of Compass, this will depend not only on internal but also on external factors originating in the US and other global economies. There is increasing dissatisfaction with escalating electricity prices and persistently high unemployment. This issue tracks the 3Q of the PR economy and highlights some trends.

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.

Puerto Rico Compass ©

Q1 2011: We Hope and Wait

An analysis of 1st Quarter indices of the PR economy

Economic indices are hitting a soft patch as business and consumers struggle to cope with rising energy and food costs as well as continued concerns regarding further weakening of the global economy. Both here and in the US mainland, economic news continues to dampen optimism regarding a quick and substantial economic recovery. The consumption rebound of 4Q 2010 with healthy new car sales bottomed again this quarter. We hope for less job losses in manufacturing and other economic activities but the reality of this quarter is otherwise. We hope for less rising energy costs and less federal spending cuts but the debate in Congress continues to unravel for political gain. And we wait locally for the start of the Public Private Partnerships, the expected positive effects of the tax and permitting reforms, and more lending from banking.

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Q4 2010: Puerto Rico’s Recovery is Past Due

What 4th Quarter 2010 economic indices reveal

The fourth quarter of 2010 unveiled mixed results. Auto sales and housing sales improved, while other indicators, especially the labor market and the construction sector, pointed to continued recession. There are doubts regarding the strength of consumer behavior during Q4 since Xmas purchases were financed in part with the withholding personal income tax in December that Treasury did not collect. It is not clear yet how the Tax Reform will generate new economic activity and create new jobs. The frequently announced initiative of Public Private Partnerships that would generate investment and jumpstart the economy has not started. According to NBER, the US recession started in December 2007 and ended in June 2009 whereas our “criollo” recovery is still in the distant horizon. For many, a local economic recovery is long overdue.

Puerto Rico Compass ©

Q3 2010: Can Reforms Get Us Out of Recession?

3rd Quarter 2010 economic indices in PR track the economy

The third quarter of 2010 has seen the start of many reforms in PR, from permits to taxes to government and a few more yet to come. The “objective” is to improve the business environment in Puerto Rico. Downsizing the government was the first initiative to reduce bureaucracy and restore fiscal discipline. Permit reform, due to start December of this year, is the first of several initiatives to accelerate construction and put PR back on track. As October ends, we start discussing tax reform with a controversial excise tax on exports of foreign companies. Next in line is labor reform to restore competitiveness in PR. The question is: can these reforms get us out of the hole?

Puerto Rico Compass ©

Q2 2010: Strike to the Economy

An analysis of 2nd Quarter 2010 economic indices in PR

Puerto Rico’s second quarter has been characterized by media coverage on the consolidation in banking sector where three troubled local banks were acquired by other banks in an FDIC assisted transaction. The second big issue was the two-month students’ strike at the University of Puerto Rico (UPR). It had huge economic implications. At the economic sectors level, construction continues to pull the economy downwards while a cautious banking sector continues to tighten credit. The Public Private Partnerships have not started yet but they still ignite positive expectations for the near future. Amidst this bleak outlook, some good news emerge, mainly positive consumer spending and new, though more long term, announcement of investments in the tourism sector.

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.

Puerto Rico Compass ©

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.