After six months of decline, Puerto Rico’s economy stepped up in July

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After declining by 11.2% from February to June, Puerto Rico’s economic activity index climbed 2.3% in July.

The Economic Development Bank for Puerto Rico released the July figures on Tuesday.

Bondholders and the Puerto Rico Oversight Board negotiating the Restructuring Support Agreements on the central government debt may be using the economic activity data in arguments over how much debt should be paid back.

The July index value was down 8.9% from the value a year earlier.

Most of the decline since July 2019 took place from March to June of this year. The declines from the previous month were as follows: March, 2.4%; April, 4.9%; May, 3.5%; and June, 0.8%.

The decline was due to the lockdown on the economy ordered by Gov. Wanda Vázquez in the aftermath of the spread of the COVID-19 virus to the island, said Chantal Benet, senior economist for Inteligencia Económica, a Puerto Rico based economic consulting firm.

While small compared to the previous months' declines, the July increase was a positive development, she said.

The July index value is now about equal to the value found in 1988. From that year it generally went up to early 2005. The July index value is now down about 29% from the 2005 peak.

Two of the four economic components of the index — total non-farm employment and electric power generation — showed no change in July from June. However, the other two — gasoline consumption and cement sales — declined.

Benet said August and September economic activity has probably been better than that of July.

However, Benet said that her firm believes that economic activity will resume its decline in October and the following months. This is partly because the federal unemployment insurance benefits have been gradually ending. Payouts ended as early as August for those who applied in March.

Benet said another reason for the decline was that it would be a resumption of Puerto Rico’s economic decline that has been going on since fiscal 2006. Since then every year except fiscal 2012 has seen an inflation-adjusted gross domestic product decline.

The seasonally adjusted nonfarm wage and salary employment figures from the U.S. Bureau of Labor Statistics, unlike the non-seasonally adjusted figures used by the EDB for the index, showed an increase in July from June. The July seasonally adjusted figure was up 6.9% from April but down 7.5% from March, when the lockdown began to be implemented.

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