Sunday, November 17, 2019

Bureau of Economic Analysis releases initial Puerto Rico statistics to estimate GDP

By on October 16, 2019

BEA Director Brian Moyer discusses prototype economic statistics for Puerto Rico at an event in San Juan (Screen capture of twitter.com/BEA_News)

Begins with consumer spending, business investment and trade

SAN JUAN — The U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) released for the first time Tuesday what it called prototype statistics for consumer spending, business investment, and trade in goods for Puerto Rico from 2012 to 2017.

These new data lay the groundwork for the BEA to estimate the island’s 2020 gross domestic product (GDP), or the market value of all goods and services produced “by labor and property,” as defined by the BEA, which is also requesting public feedback to “refine the data sources and methods used” to prepare the statistics.

The statistics can be used to understand Puerto Rico’s economic trends and support economic development strategies, particularly as the island continues its recovery from Hurricanes Irma and Maria.

The estimates released are “a major step toward the goal of producing gross domestic product (GDP) statistics for Puerto Rico that are consistent with international guidelines and that are directly comparable to data for other U.S. territories, states, the nation, and many other countries,” the BEA said.

“Future expansions to the economic statistics for Puerto Rico include the development of prototype estimates of the remaining components of GDP and total GDP. The remaining components of GDP are inventory investment, net exports of services, and government spending,” the BEA added.

The process to produce the first statistics involved input from the island’s Treasury, Planning Board and Statistics Institute.

Gov. Wanda Vázquez was on hand along with BEA Director Brian Moyer and Puerto Rico Economic Development Secretary Manuel Laboy for the announcement.
Laboy recalled the executive order that established an Inter-Institutional Working Group for the Elimination of the Electronic Export Information Requirement (EEI) for trade between Puerto Rico and the rest of the United States.

“This action was taken because the requirement to submit Electronic Export Information (EEI) for shipments between Puerto Rico and the rest of the United States, established by federal regulation and administered by the U.S. Census Bureau, perpetuates the perception that the island is not part of the customs union and the common market of the United States. This causes some U.S. companies to discriminate in terms of pricing and availability of products in Puerto Rico or to decide not to send their products to the island. The requirement also increases the price of goods shipped from the rest of the United States to Puerto Rico and adds cost to the companies of the island that send their products” stateside, Laboy explained.

The official added that, along with the GDB estimate, he hopes Puerto Rico will finally become completely integrated into the national economy, to achieve equal treatment in trade with other U.S. territories.

The BEA released the following highlights from the initial set of statistics.

Personal consumption expenditures
Personal consumption expenditures (PCE), also referred to as consumer spending, measures the goods and services purchased by households who are resident in Puerto Rico. From 2012 to 2017, “real,” or inflation-adjusted, consumer spending for Puerto Rico contracted at an average annual rate of 1.8 percent, consistent with steady declines in the population over this time period. Chart 1 shows the year-by-year decline in real consumer spending and population for Puerto Rico.

The largest decreases in real consumer spending occurred in 2014 and 2017 (see Table 1.3). In 2014, as wages dropped and consumer prices continued to increase, residents reduced their spending on both goods and services. The declines within goods were widespread; the largest decreases were for motor vehicles and “other” nondurable goods, which includes items such as medicine and clothing. In 2017, Hurricanes Irma and Maria caused catastrophic damage that restricted residents’ access to many goods and services. The decreases in health care, housing and utilities, and “other” services (including education services) were especially large.

Private fixed investment
Private fixed investment (PFI) measures spending by private businesses, nonprofit institutions, and households on fixed assets in the Puerto Rico economy. Spending is grouped into three categories: structures, equipment, and intellectual property products. Chart 2 shows the average annual growth rates for real PFI and its major components from 2012 to 2017.

After decreasing in 2013, real PFI for Puerto Rico increased for four consecutive years (see Table 2.3). From 2013 to 2017, real spending grew 3.2 percent. The growth reflected increases in equipment spending and in spending on intellectual property products, including research and development. These increases were partly offset by a decrease in spending on structures. The decline in structures reflected a large decrease in spending on residential structures that was partly offset by an increase in spending on nonresidential structures.

In 2017, spending on nonresidential structures increased, reflecting the rebuilding of commercial properties in the months following Hurricanes Irma and Maria. In contrast, spending on residential structures decreased, reflecting the continued drop in demand for homes consistent with the downward trend in the population, coupled with an even further decline after the hurricanes.

Net exports of goods
The trade balance in goods—the difference between exports and imports—was positive for all years from 2012 to 2017. The surplus ranged from $12.4 billion in 2012 to $28.6 billion in 2015 (see Table 3.1). Chart 3 shows the trade surplus, in addition to total exports and total imports of goods.

The majority of exported goods, approximately 74 percent over this period, were pharmaceuticals and organic chemicals. Other significant exports were medical devices and equipment—which are embedded within consumer goods and within capital goods—and food and beverages.

Real exports of goods grew from 2012 to 2015; the highest growth was in 2014 (see Table 3.3). The increase in 2014 reflected growth of over 50 percent in consumer goods excluding food, autos, and pharmaceuticals. The growth in this series was due to a large increase in exports of implanted or worn medical appliances. Real exports turned down in 2016 and then decreased 14.4 percent in 2017, reflecting the effects of the September hurricanes on the manufacturing sector.

Within imports of goods, pharmaceuticals and organic chemicals accounted for a large share; roughly 43 percent of the total. Petroleum products accounted for around 12 percent of imports, and food and beverages accounted for approximately 10 percent. Most petroleum and food for domestic consumption is imported.

Over the period from 2012 to 2017, the largest increase in real imports of goods was in 2016, and the largest decrease was in 2017. Real imports of goods grew 11.2 percent in 2016, reflecting a sharp increase in pharmaceuticals and organic chemicals. In 2017, real imports of goods decreased 12.4 percent. The decrease was more than accounted for by a decline in pharmaceuticals and organic chemicals, which reflected both the effects of the hurricanes and a return to earlier levels of imports within this category.

Feedback sought

The BEA urged the public to submit comments by emailing territories@bea.gov.

“Your comments will help us improve these data, which would feed into GDP statistics for Puerto Rico, covering 2012-2018. We would especially like to know:

1. How do you plan to use statistics on consumer spending, business investment, and trade in goods for Puerto Rico?

2. Would an annual release of economic statistics for Puerto Rico in May meet your needs? If not, what time of year would be most valuable to your planning or for other uses? 

3. Are these estimates consistent with other data and local information you have on Puerto Rico? If not, please outline the differences. 

4. Do you have any feedback about the methodology used to create these statistics, described in the methodologies document on our website? 

5. Are there additional source data you believe could be used to generate and corroborate these statistics beyond those described in the methodologies document on our website? 

6. Which would better meet your needs: 

• Less detailed industry breakdowns, resulting in fewer data suppressions to protect confidentiality? 

• Or, more detailed industry breakdowns, with the necessary suppressions? 

—CyberNews contributed to this report

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