Puerto Rico debt analysts saw some encouraging signs in the commonwealth’s economic activity index, which rose in September and October, breaking a 10 month slide.
The index edged 1.1% higher to 125 in September from August and climbed 0.6% to 127.7 in October, according to figures released Monday. Due to the preceding slide, year-over-year comparisons still showed substantial declines. The index value for September was 5.2% below the value for September 2012. The index value for October was 5.4% below the value for October 2012.
Amid concerns about Puerto Rico’s creditworthiness, Puerto Rico’s bond prices declined by over 22% this year to Friday, according to Standard & Poor’s.
As part of his efforts to right the fiscal ship and bring prosperity, Gov. Alejandro García Padilla and his government have been working to recruit companies to invest in Puerto Rico. He unveiled a five-year economic plan in mid-October. The plan aims to create a more diversified, knowledge-based economy.
“The relative stability of Puerto Rico’s economic indicators in recent months should help to allay fears of an accelerating decline in the underlying economy,” said Sterne Agee analyst Todd Hagerman. “However, the litmus test for the degree of economic contraction is 2014 as the budget reform begins to ripple through the economy.”
Janney Capital Markets managing director Alan Schankel said he was mildly encouraged by the index’s improvements in September and October, though he noted that the index has increased in September and October in each of the past three years.
“It is important to remember the context for Puerto Rico, whose economy is still largely driven by seasonal factors which render month-to-month comparisons practically meaningless,” Municipal Market Advisors managing director Robert Donahue wrote in MMA’s Weekly Outlook.
The index consists of four measures, three of which improved from August to October and one of which declined. During the period, gas consumption increased 7.2%, non-farm payroll employment increased 1.2%, cement sales increased 2.2%, and electric power production declined 1.2%. The Government Development Bank of Puerto Rico compiles the index.
September’s index number was delayed by the federal government shutdown in late October. Because of the shutdown, the U.S. Bureau of Labor Statistics delayed its release of nonfarm payroll employment statistics.
Puerto Rico’s unemployment rate went up to 14.7% in October from 13.9% in August. Total seasonally adjusted employment went down 0.2% in this period, according to the bureau.
The economic activity index is now about 25% below its peak in late 2005.
