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Puerto Rico economic activity dropped 9.6% in 2 months

By on June 19, 2020

Economic Development Bank publishes index for first 4 months of 2020; cement sales dropped 53.8% in April

SAN JUAN – The Economic Development Bank for Puerto Rico (EDB), published Friday data related to the island’s Economic Activity Index (EAI) during the first four months of 2020, which reflected significant drops in the EAI’s four main indicators.

EDB President Pablo Muñiz Reyes said in a press release that during the measured period, “the island experienced the consequences of a 6.4 magnitude earthquake, followed by strong aftershocks, complicated by the subsequent state of emergency decreed characterized by the severity and scope of the current COVID-19 pandemic.”

He said the index—for which readings higher than the threshold of 100 indicate expansion—registered 122.7, 122.5, 119.3 and 113.7 in January, February, March and April, respectively.

“This represents two consecutive increases of 0.5% during January and February, followed by two decreases of 2.6% for March and 7.0% for April…, when the data is compared against the same month of the previous year,” Muñiz said.

He pointed out that the index maintained a negative growth trend from January to April, with consecutive reductions of 0.6%, 0.2%, 2.6% and 4.7%.

“In accumulated terms, the EDB-EAI average for 2019 was 122.6. This shows an increase of 1.6% compared to 2018, the second consecutive annual growth after five years with consecutive annual reductions. In addition, the accumulated average of the EDB-EAI for fiscal year 2019 was 122.1, which translates into 6.1% growth versus fiscal year 2018 (115.1 or -6.6%). The result of the EDB-EAI growth rate for fiscal year 2019 is first increase after six consecutive years of reductions,” Muñiz said.

However, the cumulative average of the index for the first four months of 2020, was 119.6, a 2.2% drop.

“In turn, the accumulated average for the first ten months of fiscal year 2020 (July-April) is 121.6, or a decrease of 0.4% when compared to the same period of fiscal year 2019,” the EDB release reads. “Finally, during April 2020, the four components of the EDB-EAI: non-agricultural salaried employment, electricity generation, gasoline consumption and cement sales showed reductions of 10.3%, 2.2%, 24.2% and 53.8%. All results were compared against the April 2019 figures.”

The following are the index’s four indicators and the percentage change from April last year.

  • Nonfarm payroll employment: (10.3%)
    • (Establishment Survey/ Thousands of employees). According to the Bureau of Labor Statistics of the U.S. Department of Labor and Human Resources monthly. The establishment survey provides employment, hours, and earnings estimates based on companies’ payroll records. It does not include farm workers, private household employees, or nonprofit organization employees
  • Electric power generation: (2.2%)
    • (Millions of kilowatt-hours). This variable is provided by the Puerto Rico Power Authority (Prepa) monthly. It includes the electric power generation produced by petroleum, natural gas, coal and renewable energy sources supplied by utility-scale solar photovoltaic generating capacity, wind farms and landfill gas sources.
  • Cement sales: (53.8%) 
    • (In millions of 94-pound bags). This variable is provided by CEMEX Puerto Rico & Argos Puerto Rico LLC monthly. The data are compiled and converted by the EDB.
  • Gas consumption: (24.2%)
    • (In millions of gallons). This variable is provided by the Puerto Rico Highways and Transportation Authority (PRHTA) monthly. The EDB adjusts the series with a three-month moving average.

The EAI is highly correlated to Puerto Rico’s real gross national product (GNP) in both levels and annual growth rates. However, it is not a direct measurement of real GNP. The annual growth rate of the EAI is not the same as the annual growth rate of real GNP.

The index’s methodology includes adjusting the data for seasonality and volatility factors, and is similar to that used by the Conference Board, a nonprofit business research organization that publishes economic indicators for the United States and several other countries.

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