Puerto Rico Economic Pulse ©

July 2012: A Zero Sum Game in the Retail Sector

Analysis of trends in consumer shopping in PR

We are seeing a secular change in consumption patterns in Puerto Rico.  This will have grave implications for a retail sector used to having overly indebted consumers. Real retail sales in PR have fallen 19% since peaking in FY 2005, just before the economic downturn started. Could it be that the declining trend in retail sales is a longer-term change and not just a cyclical one? We know recession lowers asset prices (think houses and shares) while the debt used to buy those assets remains. High debt and prospects of higher inflation mean lower consumption growth. Commercial real estate will feel the pain too and the new normal may be lower growth locally and globally. Consumers have grown weary in regard to their own near-term employment and income prospects. Yet, even during this recessionary period, we have seen the entrance of new restaurant franchises and stores. Find out what are some of the factors behind these trends.