Consumer spending for Puerto Rico contracted at an average annual rate of 1.8 percent from 2012 to 2017, hitting the lowest point before the government’s bankruptcy, according to prototype statistics released by the Bureau of Economic Analysis (BEA).
The numbers published last week for public comment and feedback revealed that the largest decreases occurred in 2014 when three major credit-rating agencies downgraded Puerto Rico’s debt to junk status and in 2017, the year Hurricane Maria struck the island, causing more than $100 billion in damages.
“In 2014, as wages dropped and consumer prices continued to increase, residents reduced their spending on both goods and services. The declines within goods were widespread. The largest decreases were for motor vehicles and ‘other’ nondurable goods, which includes items such as medicine and clothing,” indicated the report of preliminary findings of the drop that almost reached 3 percent.
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“In 2007, Hurricanes Irma and Maria caused catastrophic damage that restricted residents’ access to many goods and services. The decreases in healthcare, housing and utilities, and ‘other’ services (including education services) were especially large,” added the briefing compiled with information provided by the local Planning Board, Statistics Institute and the Treasury Department.
Under the category of private fixed investment, which measures spending by private businesses, nonprofit institutions and households on fixed assets, BEA classified the spending into structures, equipment and intellectual property products.
After decreasing in 2013, business investment increased steadily by 3.2 percent for four consecutive years. The growth responded to a surge in equipment spending and intellectual property products, including research and development. Spending in the repair of commercial properties also bloomed, while investments in residential homes dwindled.
“In 2017, spending on nonresidential structures increased, reflecting the rebuilding of commercial properties in the months following Hurricanes Irma and Maria. In contrast, spending on residential structures decreased, reflecting the continued drop in demand for homes consistent with the downward trend in the population, coupled with an even further decline after the hurricanes,” noted the report.
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The analysis also showed a positive balance when comparing exports and imports. The surplus ranged from $12.4 billion in 2012 to $28.6 billion in 2015. Exports grew from 2012 to 2015, with the highest rise reported in 2014, and then a 14.4 percent drop in 2017, due to the storms’ effect on the manufacturing sector. The majority of the exported goods, 74 percent, were pharmaceuticals and organic chemicals.
Also, petroleum products accounted for around 12 percent of imports, while food and beverages accounted for approximately 10 percent. Most petroleum and food for domestic consumption is imported.
During a press conference at La Fortaleza, after meeting with Gov. Wanda Vázquez, Manuel A. Laboy, secretary of Economic Development, and Brian C. Moyer, director of BEA, explained that the estimates laid down the basis for the eventual publication of the gross domestic product (GDP) next year.
The government of Puerto Rico and the federal agency partnered to gather economic data at the request of the Congressional Task Force on Economic Growth in Puerto Rico, the U.S. Government Accountability Office and the Financial Oversight and Management Board.
As part of this first phase, BEA published statistics for consumer spending, business investment and exports and imports of goods, three of the six components it needs to calculate the GDP. The data covers the period from 2012 to 2017. The remaining components, inventory change, government spending and import and export of services, along with an update of these findings are scheduled for release at the end of 2020.
Laboy and Moyer indicated the statistics were compiled following federal and international guidelines, unlike the numbers gathered by the Planning Board, which uses a different methodology and are used for local purposes.
These numbers, assured Laboy, help “plan the best social and economic public policies for Puerto Rico.”
“It is not about a set of numbers being right and a set of numbers being wrong. That is not the story... we are using internationally accepted standards for preparing those measures, which means that the resulting GDP and GNP [gross national product] measures for Puerto Rico can be used and compared to other island nations, to the 50 states, other countries around the world. That is the main difference,” Moyer said in response to a question about the reliability of the statistics produced by local agencies.