• The San Juan Daily Star

Economic Activity Index rises 5 years in a row

Economic Development Bank for Puerto Rico President Luis Alemañy

By John McPhaul

The island’s Economic Activity Index (IAE by its Spanish initials) has seen its fifth straight year-on-year increase, according to an annual report released by the Economic Development Bank (BDE) for Puerto Rico on Tuesday.

The IAE-BDE, as the index is known, summarizes the general behavior of the island’s economic activity; it has a high correlation with the levels and growth rates of Puerto Rico’s real gross product, although the IAE-BDE is not its monthly estimate. The index is reviewed annually, during the first quarter of each calendar year; all report results are obtained using seasonally adjusted data.

“The IAE-BDE registered 119.2 points in July 2021. This represents a year-on-year increase of 5.0 percent. This is the fifth year-on-year increase after twelve consecutive decreases,” said BDE President Luis Alemañy, who presented the IAE-BDE along with economists from the Center for Economic Studies, Gladys Medina and Juan Carlos González. “If compared to the previous month, the IAE-BDE growth rate rose 0.2%. The interannual results reflect the effects of the closure caused by the pandemic on the island, combined with the federal funds that have been launched for the benefit of citizens and businessmen.”

The BDE president also noted that “although there is an upward trend in the index, economic activity requires that the improvement maintain a consistent and multisectoral positive rhythm.”

“It is also important to bear in mind that, although COVID-19 infections are beginning to be contained globally, the recovery has been uneven due to the fact that supply chains do not flow normally due to outbreaks that persist in various regions of the world,” Alemañy said. “Therefore, the recovery in the economy continues to be restricted within those segments of the population that continue to be susceptible to the virus and its mutations.”

At the same time, the economist Medina pointed out that “the employment sectors most affected by the measures that were implemented to control the virus, which are: recreation and accommodation, educational and health services, among others, still have a way to go to reach pre-pandemic levels.”

“These worker losses must be absorbed by other industries,” Medina said. “In any case, non-agricultural salaried employment showed an improvement in July, both monthly and year-on-year. Investment in infrastructure, support for trade driven by federal aid, the strength that the manufacturing sector has achieved by attracting the production of medicines and medical equipment to areas closer to the United States and the continued reintegration of the unemployed into the workforce due to COVID-19, in turn they should have a positive impact on employment on the island. Cement sales continue to exceed one million bags of 94 pounds per month, gasoline consumption has been climbing, face-to-face work is once again the standard and the generation of electrical energy remains stable.”

Medina specified that the IAE-BDE contracted 5.0 percent in 2020, reaching 116.6 points. In 2019, it averaged 122.8 and grew 1.6 percent. In turn, the IAE-BDE average for fiscal year 2021, ending June 30, ended at 117.9, which translates into a decrease of 1.7 percent versus fiscal year 2020 (120.0 or -1.9 percent). However, the average of the index for the January-July period was 119.2, points or an increase of 2.6 percent.

“During July 2021, three of the four components of the IAE-BDE — non-agricultural salaried employment, cement sales, and electric power generation — increased by 0.4 percent, 11.0 percent, and 8.0 percent, respectively,” Medina said. “Meanwhile, gasoline consumption decreased by 2.3 percent. These results were compared against the figures for June 2021.”

Likewise, the economist González specified that “similarly, when compared against the same month of the previous year (July 2020), non-agricultural salaried employment increased by 5.0 percent, gasoline consumption by 6.8 percent and the generation of electric power by 1.9 percent, while the remaining component, cement sales, decreased (-2.8 percent).”

The IAE-BDE analysis period includes the months from which the island experienced the consequences of a 6.4 magnitude earthquake, followed by strong aftershocks; along with the social and economic repercussions that the COVID-19 pandemic has caused both locally and internationally.

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