Puerto Rico economic activity revised upward

The Puerto Rico Economic Development Bank revised its 2021 Economic Activity Index readings upward with the institution reporting fiscal 2021 and the first half of fiscal 2022 were both stronger than it had previously estimated.

The United States Bureau of Labor Statistics revised its estimates of the non-farm payroll employment for calendar year 2021. Since this is one of four components of the index, the revision required the bank to revise the index values.

Whereas prior to revision, the bank estimated fiscal 2021 had a 1.8% decline compared to a year earlier, now the bank said on Tuesday the period had a 0.8% decline. The Economic Development Bank estimated the first half of fiscal 2022 had experienced a 5.5% increase in growth, upward from a 3.6% increase in previous estimates. Both are compared to the first half of fiscal 2020.

“Although job gains are evident across labor reports, particularly in industries like manufacturing, construction, trade and services, certain factors are still of concern," the bank said in its report. "Inflationary trends and expectations, high energy costs and geopolitical pressures linked to the evolution of the Russia-Ukraine war add uncertainty to the island’s economic recovery, as they do throughout the rest of the world.”

Fotolia

The bank also released the index figures for January and February, with the January figure up 0.4% from December but the February figure was down 0.2% from January. Comparing the values to those a year prior, the January figure was up 4.3% and the February was up 3.5%.

The economic conditions may affect negotiations on the debt of the Puerto Rico Electric Power Authority, which are expected to start this week.

While the news shows better numbers, the index comparison is “tainted… because we were closed [in 2020],” said Heidi Calero, president of H. Calero Consulting Group. She said a better comparison would be figures from 2019.

Calero said if one compares this February to February 2019, the index grew 2.1%. She noted that jobs are up but that mainly this was service jobs, which increased 38%. Restaurant, health, hotels and similar employment is up. But manufacturing employment is little changed and this is the “core productive sector,” she said.

Gasoline and electricity consumption, which are both parts of the index, are both down since February 2019.

Calero said Puerto Rico economic activity has been advancing because federal aid contributed to increased retail spending. However, many of these dollars end up sent off island to purchase imports and do not lead to real sustained improvements in the economy, she said.

“I’m very leery to this ‘road to prosperity’ that the governor spoke about in his [March state of the territory] message to the legislature and to the people of Puerto Rico,” Calero said. Gov. Pedro Pierluisi last month called for a 20% increase to payroll spending in his state of the territory address. The governor is also proposing a $12.573 billion general fund budget for fiscal 2023, which would be a 1.6% increase over the amended fiscal 2022 general fund budget the Oversight Board approved in February.