Economic Activity Index ( FAFAA-EAI ) October, November and December 2016
About the interpreta>on of the FAFAA-EAI The FAFAA-EAI is an indicator of general economic ac>vity, not a direct measurement of real GNP. The annual growth rate of the FAFAA-EAI is not the same as the annual growth rate of real GNP. When it is annualized, the level of the FAFAA-EAI is highly correlated with the level of real GNP (with a Pearson correla8on coefficient of 0.9792, for FY1981-FY2015). Annual growth rates of both variables are also highly correlated (with a Pearson correla8on coefficient of 0.9538, for FY1982-FY2015). Nevertheless, the annual growth rate of the FAFAA-EAI IS NOT the same as the annual growth rate of real GNP. Being highly correlated does not mean being equal. In order to approximate real GNP growth from EAI annual growth, we es8mate a linear regression model rela8ng both variables. Plugging in FAFAA-EAI annual growth rates into the resul8ng equa8on, we obtain es8mates for the annual growth rates of real GNP, which approximate real GNP annual growth figures published by the Planning Board. 2
About the interpreta>on of the FAFAA-EAI (2) Real GNP annual growth rates es>mated with annual growth rates of the FAFAA-EAI track closely the annual growth rates of real GNP published by the Puerto Rico Planning Board. FAFAA-EAI annual growth Real GNP annual growth estimated using the FAFAA-EAI Current real GNP annual growth Fiscal Year 2002-0.8% 2003 1.6% 1.8% 2.1% 2004 2.3% 2.3% 2.7% 2005 1.4% 1.6% 1.9% 2006 0.1% 0.7% 0.5% 2007-1.5% -0.6% -1.2% 2008-2.3% -1.2% -2.9% 2009-4.2% -2.7% -3.8% 2010-4.8% -3.2% -3.6% 2011-2.8% -1.6% -1.7% 2012 0.6% 0.5% 2013 0.5% 2014-3.4% -2.1% -1.7% 2015-1.8% -0.8% -0.6% However, real GNP growth es8mates based on the FAFAA-EAI are rela8vely close (although not iden>cal) to actual real GNP growth figures. Real GNP growth for FY2015 was es8mated at -0.8% using a regression equa8on with the growth of the FAFAA-EAI as the independent variable. The index s annual growth is calculated as the annual percentage change of the twelve-month average. For FY2014, the index-based es8mate for real GNP growth showed a slightly larger decline than the actual official measure of the Puerto Rico Planning Board; while for FY2015, that index-based es8mate was closer to the Planning Board measure. 3
About the interpreta>on of the FAFAA-EAI (3) The graph compares actual real GNP growth rates with projected real GNP growth rates based on the FAFAA-EAI. Annual Growth Rate Comparisons: Real GNP, and real GNP es>mated with the FAFAA-EAI Percent change (y-oy) 4% 3.0% 3% 2% 1.9% 1% 0% -1% -2% -3% 1.5% 1.1% 2.1% 1.8% 2.7% 2.3% 1.9% 1.6% 0.7% 0.5% -0.6% -1.2% -1.2% -2.9% -2.7% -3.2% -1.6% -1.7% 0.6% 0.5% 0.5% -1.7% -2.1% -0.6% -0.8% -4% -3.8% -3.6% -5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Real GNP annual growth rate Real GNP annual growth rate es8mated with the FAFAA-EAI Real GNP data source: Puerto Rico Planning Board 4
Special Commentary Oct-Dec 2016 Discrepancies with gasoline consump8on data delayed the publica8on of the index by three months. Data were finally verified to make sure they are accurate to our best knowledge. The December 2016 publica8on (released in February 2017) includes data for October, November and December. The FAFAA-EAI graphs and the monthly indicators include the last month available. 5
Overview October 2016 In October 2016, the FAFAA-EAI registered a 1.7% y-o-y reduc>on, and a month-over-month (m-o-m) decrease of 0.7%. The October 2016 figure for the FAFAA-EAI was 122.8, a 1.7% reduc8on compared to October 2015, and a 0.7% decrease compared to September 2016. On a fiscal year-to-date basis (July to October 2016) the decline was of 1.4% with respect to the same period of the previous fiscal year. Total non-farm payroll employment for October 2016 averaged 889,100, an annual decrease of 1.0%. Electric power genera8on for October 2016 totaled 1,805.1 million kwh, an annual decrease of 3.4%. The preliminary number for gasoline consump8on* in October 2016 was 76.8 million gallons, 8.6% below October 2015. Cement sales for October 2016 totaled.93 million bags, registering an annual decrease of 14.3%. * The monthly gasoline consump8on is es8mated by the FAFAA from the Treasury Department's monthly gasoline excise tax collec8ons paid by importers which are transferred to P.R. Highways and Transporta8on Authority. These collec8ons fluctuate due to changes in inventories and purchases, which do not necessarily reflect the actual monthly consump8on reported by retailers. 6
Overview November 2016 In November 2016, the FAFAA-EAI registered a 2.8% y-o-y reduc>on, and a month-over-month (m-o-m) decrease of 1.3%. The November 2016 figure for the FAFAA-EAI was 121.3, a 2.8% reduc8on compared to November 2015, and a 1.3% decrease compared to October 2016. On a fiscal year-to-date basis (July to November 2016) the decline was of 1.7% with respect to the same period of the previous fiscal year. Total non-farm payroll employment for November 2016 averaged 897,000, an annual decrease of 1.2%. Electric power genera8on for November 2016 totaled 1,640.6 million kwh, an annual decrease of 2.1%. The preliminary number for gasoline consump8on* in November 2016 was 74.8 million gallons, 7.6% below November 2015. Cement sales for November 2016 totaled.81 million bags, registering an annual decrease of 14.0%. * The monthly gasoline consump8on is es8mated by the FAFAA from the Treasury Department's monthly gasoline excise tax collec8ons paid by importers which are transferred to P.R. Highways and Transporta8on Authority. These collec8ons fluctuate due to changes in inventories and purchases, which do not necessarily reflect the actual monthly consump8on reported by retailers. 7
Overview December 2016 In December 2016, the FAFAA-EAI registered a 2.9% y-o-y reduc>on, and a month-over-month (m-o-m) decrease of 0.1%. The December 2016 figure for the FAFAA-EAI was 121.1, a 2.9% reduc8on compared to December 2015, and a 0.1% decrease compared to November 2016. On a fiscal year-to-date basis (July to December 2016) the decline was of 1.9% with respect to the same period of the previous fiscal year. Total non-farm payroll employment for December 2016 averaged 910,400, an annual decrease of 1.2%. Electric power genera8on for December 2016 totaled 1,670.6 million kwh, an annual decrease of 2.3%. The preliminary number for gasoline consump8on* in December 2016 was 77.5 million gallons, 11.1% below December 2015. Cement sales for December 2016 totaled.93 million bags, registering an annual decrease of 2.7%. * The monthly gasoline consump8on is es8mated by the FAFAA from the Treasury Department's monthly gasoline excise tax collec8ons paid by importers which are transferred to P.R. Highways and Transporta8on Authority. These collec8ons fluctuate due to changes in inventories and purchases, which do not necessarily reflect the actual monthly consump8on reported by retailers. 8
In December 2016, the FAFAA-EAI registered a 2.9% year-over-year (y-o-y) reduc>on, and a month-over-month (m-o-m) decrease of 0.1%. FAFAA Economic Ac>vity Index 140 10% 135 8% 6% 130 Index (January 1980 = 100) 125 120 115 110 105 100-0.7% -0.9% 0.1% 0.1% -0.4% -0.5% -0.5% 0.3% 0.5% 0.9% 0.4% 0.2% 0.1% -5.6% -5.1% -4.2% -3.7% -3.4% -4.1% -4.1% -3.9% -3.4% -2.7% -2.8% -3.1% -2.6% -2.4% -2.4% -2.5% -2.4% -1.7% -1.6% -2.0% -1.9% -1.5% 0.6% 1.0% 1.1% 0.9% 1.0% 1.2% 0.4% 1.7% 1.8% 2.3% 2.3% 0.2% 0.1% 0.1% 1.9% 1.2% -0.6% -0.5% -0.6% -0.6% -0.5% -0.6% -0.5% 0.2% -0.6% 0.1% -0.4% 0.3% 0.2% -0.4% 0.2% -0.7% -1.3% 0.2% -0.5% -1.1% -1.5% -1.8% -2.2% -3.2% -3.6% -3.6% -3.7% -3.7% -4.1% -4.1% -3.9% -3.6% -2.9% -2.9% -2.7% -2.4% -2.1% -2.2% -2.8% -2.8% -2.6% -1.7% -1.5% -1.1% -1.4% -1.2% -1.1% -1.0% -0.8% -1.0% -0.8% -1.0% -1.0% -1.4% -1.5% -1.8% -1.9% -1.9% -1.8% -1.7% -1.7% -1.2% -1.2% -1.7% -2.8% -2.9% 136.3 136.0 136.1 136.1 135.7 134.5 134.2 134.1 134.2 134.3 133.7 133.1 132.8 132.8 132.8 132.7 132.4 132.3 132.0 131.4 131.7 132.3 133.4 133.9 134.1 134.3 134.0 134.1 134.1 134.5 134.4 134.4 134.7 134.8 135.0 134.2 133.5 132.8 132.0 131.6 131.1 130.3 129.6 129.5 129.8 129.8 129.4 128.7 128.4 128.0 128.2 127.8 127.5 127.2 126.9 126.7 126.1 126.1 126.1 126.5 126.4 126.6 126.4 126.2 126.1 125.9 125.9 125.4 125.1 124.9 124.8 124.8 124.6 124.3 124.0 123.9 123.9 123.8 123.8 123.9 123.7 122.8 121.3 121.1 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Sep-16 4% 2% 0% -2% -4% -6% -8% -10% Value (LHS) Year-over-year percent change (RHS) Month-over-month percent change (RHS) 9
The complete series of the FAFAA-EAI, which starts in January 1980, shows the recessions of FY1982 and FY1983, the mild recession of FY1991, and the recession of 2001. It also shows the downward path of the Index since the beginning of the current recession. 160 FAFAA Economic Ac>vity Index 150 140 Index (January 1980 = 100) 130 120 110 100 90 80 Dec-80 Dec-81 Dec-82 Dec-83 Dec-84 Dec-85 Dec-86 Dec-87 Dec-88 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 10
FAFAA Economic Ac>vity Index: Data for the past decade PUERTO RICO ECONOMIC INDICATORS FAFAA Economic Activity Index (January 1980 = 100) PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY Economic Analysis Division FISCAL YEAR * 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 JULY 153.1 147.8 139.9 134.2 132.0 134.4 129.6 126.9 125.9 123.8 AUGUST 152.5 147.5 139.6 134.1 131.4 134.4 129.5 126.7 125.4 123.9 SEPTEMBER 152.1 146.4 138.9 134.2 131.7 134.7 129.8 126.1 125.1 123.7 OCTOBER 151.1 145.7 138.1 134.3 132.3 134.8 129.8 126.1 124.9 122.8 NOVEMBER 150.8 144.8 137.5 133.7 133.4 135.0 129.4 126.1 124.8 121.3 DECEMBER 150.2 144.9 137.3 133.1 133.9 134.2 128.7 126.5 124.8 121.1 JANUARY 150.0 144.3 136.3 132.8 134.1 133.5 128.4 126.4 124.6 FEBRUARY 149.7 143.4 136.0 132.8 134.3 132.8 128.0 126.6 124.3 MARCH 149.5 142.1 136.1 132.8 134.0 132.0 128.2 126.4 124.0 APRIL 149.1 141.4 136.1 132.7 134.1 131.6 127.8 126.2 123.9 MAY 148.8 140.5 135.7 132.4 134.1 131.1 127.5 126.1 123.9 JUNE 148.3 140.3 134.5 132.3 134.5 130.3 127.2 125.9 123.8 YEAR OVER YEAR PERCENTAGE CHANGE FISCAL YEAR * 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 JULY -1.0-3.5-5.3-4.1-1.6 1.8-3.6-2.1-0.8-1.7 AUGUST -1.3-3.3-5.4-3.9-2.0 2.3-3.6-2.2-1.0-1.2 SEPTEMBER -1.8-3.7-5.1-3.4-1.9 2.3-3.7-2.8-0.8-1.2 OCTOBER -2.6-3.6-5.2-2.7-1.5 1.9-3.7-2.8-1.0-1.7 NOVEMBER -2.9-4.0-5.0-2.7-0.2 1.2-4.1-2.6-1.0-2.8 DECEMBER -3.2-3.5-5.3-3.1 0.6 0.2-4.1-1.7-1.4-2.9 JANUARY -2.9-3.8-5.6-2.6 1.0-0.5-3.9-1.5-1.4 FEBRUARY -2.6-4.2-5.1-2.4 1.1-1.1-3.6-1.1-1.8 MARCH -2.3-5.0-4.2-2.4 0.9-1.5-2.9-1.4-1.9 APRIL -2.2-5.2-3.7-2.5 1.0-1.8-2.9-1.2-1.9 MAY -2.5-5.5-3.4-2.4 1.2-2.2-2.7-1.1-1.8 JUNE -2.8-5.4-4.1-1.7 1.7-3.2-2.4-1.0-1.7 YEAR OVER YEAR DIFFERENCE FISCAL YEAR * 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 JULY -1.5-5.3-7.9-5.8-2.2 2.4-4.8-2.7-1.1-2.1 AUGUST -1.9-5.0-8.0-5.5-2.7 3.1-4.9-2.9-1.3-1.4 SEPTEMBER -2.8-5.7-7.4-4.8-2.5 3.0-4.9-3.6-1.0-1.5 OCTOBER -4.0-5.4-7.6-3.7-2.0 2.5-5.0-3.7-1.3-2.1 NOVEMBER -4.4-6.0-7.3-3.8-0.3 1.6-5.6-3.3-1.3-3.5 DECEMBER -5.0-5.3-7.6-4.2 0.8 0.3-5.5-2.2-1.7-3.7 JANUARY -4.5-5.7-8.0-3.6 1.4-0.6-5.2-1.9-1.8 FEBRUARY -4.1-6.3-7.3-3.2 1.5-1.5-4.8-1.4-2.3 MARCH -3.5-7.5-6.0-3.2 1.2-2.0-3.9-1.7-2.4 APRIL -3.4-7.7-5.3-3.4 1.4-2.4-3.8-1.6-2.4 MAY -3.8-8.2-4.8-3.3 1.6-3.0-3.6-1.3-2.2 JUNE -4.2-8.1-5.7-2.3 2.3-4.2-3.1-1.3-2.2 SUMMARY DATA 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 FISCAL YEAR * AVERAGE 150.4 144.1 137.2 133.3 133.3 133.2 128.7 126.4 124.6 DIFFERENCE -3.6-6.3-6.9-3.9 0.0-0.1-4.6-2.3-1.7 % CHANGE -2.3-4.2-4.8-2.8 0.0-0.1-3.4-1.8-1.4 JUL-DEC AVERAGE 151.6 146.2 138.5 133.9 132.4 134.6 129.5 126.4 125.1 122.8 DIFFERENCE -3.3-5.4-7.6-4.6-1.5 2.1-5.1-3.1-1.3-2.4 % CHANGE -2.1-3.6-5.2-3.3-1.1 1.6-3.8-2.4-1.0-1.9 CALENDAR YEAR AVERAGE 147.7 140.3 134.9 132.5 134.4 130.7 127.1 125.7 123.4 DIFFERENCE -4.7-7.4-5.4-2.3 1.9-3.7-3.6-1.4-2.3 % CHANGE -3.1-5.0-3.9-1.7 1.4-2.8-2.7-1.1-1.8 JAN-DEC AVERAGE 147.7 140.3 134.9 132.5 134.4 130.7 127.1 125.7 123.4 DIFFERENCE -4.7-7.4-5.4-2.3 1.9-3.7-3.6-1.4-2.3 % CHANGE -3.1-5.0-3.9-1.7 1.4-2.8-2.7-1.1-1.8 11
FAFAA Economic Ac>vity Index Components Total Non-Farm Payroll Employment* (Thousands of jobs) 980 960 940 920 900 880 860 840 820 Total non-farm payroll employment for December 2016 averaged 910,400, an annual decrease of 1.2%. 2,500 2,000 1,500 1,000 500 Jan-13 0 Jan-13 May-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 Electric Power Generation* (Millions of kwh) Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 May-16 Sep-16 Sep-16 Dec-16 Dec-16 Electric power genera8on for December 2016 averaged 1,670.6 million kwh, an annual decrease of -2.3%. Sources: BLS and PREPA * Not seasonally adjusted. 12
FAFAA Economic Activity Index Components Gasoline Consumption* (Millions of gallons) 120 100 80 60 40 20 The preliminary es8mate of gasoline consump8on for December 2016 was 77.5 million gallons, for an annual decrease of 11.1%. 0 Cement Sales* (Cement bags sold, in thousands) 1,900 1,700 1,500 1,300 Cement Sales for December 2016 totaled.93 million bags, an annual decrease of 2.7%. 1,100 900 700 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Dec-16 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Dec-16 Sources: PRHTA and FAFAA * Not seasonally adjusted. *The monthly gasoline consump8on is es8mated by the FAFAA from the Treasury Department's monthly gasoline excise tax collec8ons paid by importers which are transferred to P.R. Highways and Transporta8on Authority. 13
Descrip>on of the FAFAA-Economic Ac>vity Index 14
FAFAA-EAI Highlights and Composi>on FAFAA Economic Ac>vity Index Highlights Advantages of the FAFAA-EAI: Readily available Highly correlated to Puerto Rico s real GNP Reliable tool to monitor actual trend of Puerto Rico economy The FAFAA-EAI is made up of 4 indicators: Total Payroll Employment (Establishment Survey/ Thousands of employees) Total Electric Power Genera8on (Millions of kwh) Cement Sales (Millions of bags) Gas Consump8on (Millions of gallons) 15
Descrip>on of the FAFAA-EAI The FAFAA-EAI is a coincident index for the economic ac8vity of Puerto Rico. It is highly correlated to Puerto Rico s real GNP in both, levels and annual growth rates. This index s methodology is similar to that used in The Conference Board s coincident index of the US economy. This methodology follows a standard procedure to adjust the data for seasonality and vola8lity factors. Real Gross Na>onal Product as a func>on of the FAFAA Economic Ac>vity Index GNP54 (Million of dollars at 1954 prices) Sources: FAFAA 7,500 6,500 5,500 4,500 3,500 80 Relationship on the levels: FY1981-FY2015 y = 49.683x 492.72 R² = 0.9588 90 100 110 120 FAFAA-EAI (January 1980=100) 130 140 150 160 GNP54 Annual Growth Relationship on the growth rates: FY1982-FY2015 y = 0.774x + 0.0058 R² = 0.9098 6% 4% 2% 0% -2% -4% -6% -6% -4% -2% 0% 2% 4% 6% 8% FAFAA-EAI annual growth 16
Disclaimer The FAFAA-EAI and its indicators are subject to revisions. While the informa8on comprising the FAFAA-EAI has been obtained from sources FAFAA believes to be reliable, FAFAA is not responsible for any errors or omissions, or for the results obtained from the use of this informa8on. 17