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Puerto Rico Purchasing Managers Index bounces back after April slump

By on September 2, 2020

(Screen capture of https://estadisticas.pr)

Local manufacturing activity expands in May, June and July

SAN JUAN – After contracting sharply amid the severest of Covid-19 emergency measures in April, Puerto Rico manufacturing activity rebounded in May, June and July, according to a key industry indicator. 

The Puerto Rico Manufacturing-Purchasing Managers Index (PRM-PMI) has soared back into positive terrain, rising past the key threshold level of 50, registering 50.4 in May, 59.5 in June and 58.8 in July, on a non-seasonally adjusted basis. 

The PRM-PMI plunged to 44 in April, the second lowest reading since the index began in 2010. The lowest index reading was 33.1 in September 2017, when hurricanes Irma and Maria devastated the island.  

The index had reached 50.5 in March, surpassing the threshold level for the first time in 11 months. A reading below 50 suggests a contraction in the sector with respect to the previous month, while a reading above this figure indicates expanded activity with respect to the previous month. 

In a PRM-PMI supplemental survey of manufacturing establishments conducted in July, only 6 percent of respondents indicated their operations ceased following the health measures taken by the government due to the Covid-19 pandemic emergency, down from 15 percent in April.  

According to the survey, the factors that impacted manufacturing operations during July were: a reduction in suppliers’ deliveries (53 percent), a reduction in demand (47 percent), a reduction in staff (35 percent), a reduction in inventory (24 percent), and others (24 percent).   

The PRM-PMI is calculated as the simple average of five sub-indexes, representing different conditions in establishments: new orders, production, employment, supplier deliveries and plant inventories.  

All of the July sub-indexes were at or above the threshold level of 50, except for the supplier deliveries sub-index, which dropped to 44.1 in July, after remaining above the expansion threshold for four consecutive months. This indicates a slowdown in supplier deliveries, according to the PRM-PMI report. 

The supplier deliveries sub-index had surged from 65.8 in March to 75 in April. 

The July new orders and employment sub-indexes increased with respect to the previous month. 

New orders at manufacturing establishments were higher than in June, as the corresponding sub-index increased to 67.6, remaining above the threshold for the second consecutive month. This sub-index had plunged to 30 in April.  

Manufacturing employment also increased in July compared to the previous month, as the corresponding sub-index was at 58.8. This is the second consecutive month in a row in which the employment sub-index has been above the threshold of 50. This sub-index had shrunk to 32.5 in April. 

The production sub-index was 55.9 in July, remaining above the threshold for the third consecutive month. This sub-index reached a low of 25 in April. 

Plant inventories continued to increase in July, with a corresponding sub-index of 67.6, remaining above the threshold for expansion of 50 for the fourth consecutive month. Such inventories began to surge in April, as that month’s corresponding sub-index climbed to 57.5, up from 42.1 the previous month. 

The original curfew/lockdown order issued by Gov. Wanda Vázquez in mid-March exempted “essential” manufacturing operations involving food, pharmaceutical and medical device production. On March 26, the secretary of the Puerto Rico Economic Development and Commerce Department (DDEC by its Spanish initials), Manuel Laboy, issued a notice allowing textile and apparel manufacturers on the island to reopen for the exclusive production of personal protective equipment used in the fight against Covid-19, as well as for filling of U.S. Department of Defense contracts. 

Additional manufacturing activities were allowed in May when the governor relaxed the lockdown order and gradually reopened the economy as local Covid-19 cases and deaths seemed to be under control. 

The PRM-PMI has been at or above the threshold level in 70 of the 123 months since the survey was first undertaken in 2010, according to the July report. The index is currently available only on a non‐seasonally adjusted basis, which means that seasonal fluctuations can affect its performance. 

The PRM-PMI survey is the result of a collaborative project between the Puerto Rico Manufacturers Association (PRMA) and the Puerto Rico Statistics Institute (PRSI). Survey participants include manufacturing establishments with 50 or more employees with membership in the PRMA. The index measures short-run business conditions in Puerto Rico’s manufacturing sector and provides a broad-based metric for the productive side of island’s economy, as described by the report. 

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