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Mixed signals in PR economic indexes

The Government Development Bank finally released its long overdue Economic Activity Index for both September and October late Sunday night.

“The Economic Activity Index has shown two consecutive months of positive month-over-month growth rates, both in September 2013 and October 2013,” the GDB said in its delayed report. “While it cannot be concluded that the economic activity is necessarily experiencing an effective inflection point, these are the first months of increase since October 2012.”

The GDB-EAI releases for September and October were delayed by the partial federal government shutdown, which pushed back the release of employment reports of the U.S. Labor Department’s Bureau of Labor Statistics.

The GDB-EAI measures four categories: employment, electric power generation, cement sales and gasoline consumption.

The BLS released its unemployment and jobs numbers for September and October more than two weeks ago. The local Labor Department issued its employment reports for both months on the same day.

“During the past federal government shutdown (October 1 to October 16, 2013), several federal government offices remained closed. This has a direct effect on the publication schedule of the Bureau of Labor Statistics,” the GDB explained Sunday.

The GDB-EAI was at 125.0 for September, a 5.2 percent reduction compared to September 2012. Moreover, the fiscal year-to-date (July- September) EAI figure showed a reduction of 5.3 percent with respect to the corresponding figure for FY2013. For the month of September, the EAI registered a month-over-month increase of 1.1 percent.

The preliminary number of gasoline consumption was 93.1 million gallons in September 2013, 2.3 percent below September 2012. The gasoline consumption number for the first quarter of fiscal 2014 was 3.1 percent below the corresponding number for FY2013. Total non-farm payroll employment for September 2013 averaged 885,000, an annual reduction of 5.4 percent. Furthermore, total non-farm payroll employment showed a decrease of 4.6 percent so far this fiscal year.

Electric power generation for September 2013 totaled 1,895.3 million kWh, an annual decrease of 3.6 percent. Electricity generation for for the first three months of fiscal 2014 was 3.3 percent less than during the same period last year.

Cement sales for September 2013 totaled 1.22 million bags, registering an annual reduction of 21.3 percent. Sales for the fiscal 2014 first quarter were down 17.0 percent with respect to the figure for the same period of FY2013.

For October, the EAI was 125.7, a 5.4 percent reduction compared to October 2012. The cumulative 2014 EAI (July-October) showed a reduction of 5.3 percent from the same four-month period last year corresponding figure for last year. For the month of October, the EAI registered a month-over-month increase of 0.6 percent.

The preliminary number of gasoline consumption was 90.5 million gallons in October 2013, 4.7 percent below the same month last year. The fiscal 2014 year-to-date gasoline consumption number was 3.5 percent below the same four-month period last year.

Total non-farm payroll employment for October 2013 averaged 894,600, an annual reduction of 5.0 percent. Total non-farm payroll employment showed a decrease of 4.7 percent for the first four months of fiscal 2014.

Electric power generation for October 2013 totaled 1,925.8 million kWh, an annual decrease of 3.2 percent. Electricity generation for the first trimester was 3.3 percent less than during the same period of fiscal 2013.

Cement sales for October 2013 totaled 1.41 million bags, registering an annual reduction of 14.6 percent. Sales for the July-October period were down 16.4 percent with respect to the figure for the same period of FY2013.

The administration of Gov. Alejandro García Padilla recently dropped expectations for economic growth this fiscal year. The Planning Board is now projecting that the economy will shrink by 0.8 percent in fiscal 2014, dropping its previous forecast for razor-thin growth of 0.2 percent.

The revision brings the government’s outlook more or less in line with what private economists have been saying for months: the economic slide is not over.

Although the forecast for 2014 dimmed, the Planning Board revised its fiscal 2013 contraction estimate, narrowing the projected decline to 0.3 percent from an initial 0.4 percent estimate.

The GDB-EAI had seen a sustained slide for 10-straight months and has now posted a full year of year-over-year contractions.

The GDB-EAI had returned to growth in December 2011 for the first time since Puerto Rico’s recession began in 2006. It showed small but consistent year-over-year gains for nearly a year before beginning to retreat again last October. Since then, it has been on a steadily steepening decline: falling 0.7 percent in November, 2012, 1.3 percent in December, 2012, 1.8 percent in January, 3.1 percent in February, 3.1 percent in March, 3.5 percent in April and 3.4 percent in May, 4.5 percent in June, 5 percent in July, and 5.4 percent in August.

Still, tax revenues beat estimates in October and remain ahead of projections overall through the first four months of fiscal 2014 as a range of new revenue measures take effect, the Puerto Rico Treasury Department said.

The $9.77 billion general fund budget for fiscal 2014 (which started July 1) is a $688 million increase over the fiscal 2013 budget. The consolidated fiscal 2014 budget, which includes federal funds, will near $29 billion.

The budget contains $1.38 billion in revenue from a range of new taxes and collection efforts.

There is a lot riding on meeting those tax targets as the administration works to avoid a credit downgrade to junk territory. All three credit rating agencies – Standard & Poor’s, Moody’s and Fitch – rate Puerto Rico credit one notch above investment grade and have warned of potential downgrades to a junk rating.

Most analysts say preserving its investment-grade rating will depend on hitting revenue targets during the current 2014 fiscal year (which started July 1) and an improvement in the economy.


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