Economic Index Inches Up in December After Long Drop
Economic activity in Puerto Rico showed slight improvement in December 2015 after dropping for six-straight months, according to indexes that economist Ángel Rivera Montañez prepared and published in a recent monthly report. In December, commercial activity improved as a result of the holiday shopping season and an increase in construction activity after three months of steady drops.
The Coincident Indicator Index (CII)—a metric that shows the current state of economic activity in a given area—increased by 0.1% in December versus the previous month, the first increase in six months. Increases in the production of electric energy, construction and retail sales contributed to the uptick. Compared with December 2014, the index decreased by 2.9%. In quarterly terms, economic activity fell 1.3%, the biggest drop since the second quarter of 2013.
The Leading Indicator Index (LII), which forecasts economic activity, registered an increase of 0.6% in December, but it also showed a deceleration in its rate of growth during the past 12 months. When compared to December 2014, the LII grew by 6.9%.
In general terms, the indexes show a negative trend in economic activity. “In a certain period during the past six months, the average monthly decrease in economic activity has been -0.3%, while in the previous six-month period, the average drop was -0.1%,” Rivera Montañez noted, adding that segments such as manufacturing and construction continue to show signs of weakness. In particular, perspectives on construction are negative in light of an absence of public works and scant investment from the private side.
“The duration, scope and depth of the current downturn in economic activity have been the most severe in Puerto Rico since World War II,” the economist explained. “Economic activity, as measured by the CII since the start of the recession in April 2006 until the present, has dropped 27.1%, a trend that was only interrupted in 2012 during several consecutive quarters of growth. This technically meant an end to the recession, but it nevertheless continued, structurally speaking,” he said.
Rivera Montañez noted that “fiscal uncertainty continues to grow as the short-term probability of a fiscal rescue by the White House or U.S. Congress is looking less probable. Without a doubt, carrying out the necessary fiscal adjustments through local fiscal policies beyond the federal level will be inevitable.”