[Editorial] Double Espresso Holiday Sales
Puerto Rico’s never-ending Navidades came back to true form today, after losing the top spot as the longest yuletide celebration in the Hemisphere—several months in the dark after being throttled by a Category 4 hurricane can dampen Christmas spirit. Yes, a resilient people and a steadfast business community moving forward after being brought to its knees has a way of inspiring confidence as we kick off the holiday season with what is expected to be a wild Black Friday.
In 2017, not a creature was stirring, not even a mouse—in 2018, do not be surprised to see scores of hyper-shoppers with one flat-screen under each arm. In fact, economists and leaders of the retail sector interviewed for the Special Holiday Retail report in this edition are all optimistic that retail sales could show as much as a 9 percent spike over the previous year. Retail flatlined in 2017 thanks in large part to a moribund economy devastated by the mass exodus of nearly 300,000 consumers and an electric grid that had many businesses powerless and shuttered.
If you fast-forward to the holidays in 2018, you will find a much more encouraging economic outlook inspired by several factors.
For one, many of those consumers who out-migrated after the 2017 hurricanes have returned. The most recent calculation is that net out-migration stands at 47,000 people. The return of consumers underpinned by the influx of federal aid, with some $4.3 billion obligated under FEMA’s Public Assistance program, and a second shot in the arm from some $1.5 billion in Community Development Block Grant (CDBG) funds coming down the pike before year’s end will have money running through this economy.
Rather than using consumer confidence as an indicator of Puerto Rico’s economic outlook, observers of this economy in the Mambo tropics often point to auto sales as an accurate litmus test of performance. And in that regard, some economists are confident that the auto sector will surpass the paltry level of 85,000 units sold in 2017. The forecast is upward of 100,000 units for 2018. We shall see.
If brisk sales shall come to pass, it will be largely because the economy is hyper-charged with “Fed fund transfers, claims payments from insurance companies, and out-of-pocket money to rebuild.” As one economist, Vicente “Chenti” Feliciano, put it: “The outlook for retail sales is positive; however, a word of caution: This is an economy on caffeine, and the positive outlook relies on the economy staying caffeine-high. How long this caffeine lasts, however, is an open question.”
The question we in the financial community should be asking ourselves: What happens when the high wears off? Do we go back to our languid state, borrowing much as junkies looking for their next fix or do we drive measures for job creation—push for more robust results from talent in our applied sciences; tweak, rather than gut, existing incentives; and push for parity in Medicaid and Medicare funding for the island, among other measures?
As we celebrate Thanksgiving and get set to shop ’til we drop, we should be thankful for the prospect of an economy running on a double espresso. It behooves us to realize that the spike in adrenaline is temporary— very similar to a sugar rush—which is often followed by a languid state. And a lumbering pace is never conducive to the sort of sustainable development that will lead to the massive job creation to which we should ultimately aspire.