Puerto Rico’s economic activity drops for 2nd straight month in Feb.
Indicators show slowdown amid global trade tensions and fiscal uncertainty.
Puerto Rico’s economic activity declined in February for the second consecutive month, according to the island’s Coincident and Leading Economic Indicators. The slowdown follows months of deceleration and growing concerns over a broader contraction tied to global trade tensions and fiscal policy uncertainty.
The economic activity has begun to show reductions after several months of deceleration,” said a report by Ángel Rivera-Montañez, a former analyst at the Planning Board’s Economic Indices Unit and economist at Puerto Rico’s Department of Economic Development and Commerce (DDEC, in Spanish) for 17 years, serving as principal economist and director of the DDEC’s Economics Office, and now an economic consultant for Stratsol Inc.
“Fears of a rapid downward shift continue to grow, fueled by a high level of uncertainty following the Trump administration’s announcements on global tariffs and public spending cuts,” the report stated.
The Puerto Rico Coincident Index (IIC, in Spanish), which reflects current economic conditions, registered 110 points (base year 2019=100), a 0.4% decrease from the previous month.
The decline was attributed to seasonally adjusted and deflated components such as estimated retail sales, construction activity and electricity generation. Nonfarm payroll employment contributed positively, while the manufacturing index remained unchanged.
Despite the monthly drop, annual comparisons still show mild growth. The IIC rose 0.2% compared to February 2024, and for the fiscal year-to-date (July–February), the index posted a 0.5% increase versus a 3.3% growth rate during the same period the previous fiscal year.
Calendar year-to-date (January–February) figures show weaker growth, with an annual rate of only 0.2%, compared to 3.3% in the same months last year.
The Leading Economic Index (IIA, in Spanish), which anticipates future economic activity, also declined 0.4% in February — its second consecutive monthly drop. While the IIA posted a 0.5% year-over-year increase — the fifth consecutive annual uptick after 32 months of declines — it reflects an overall deceleration trend.
“The leading indicators point to a slowdown in economic activity in the coming months, although this may change rapidly given constant shifts in fiscal and commercial policy,” the report said. It added that while the IIA’s current levels do not confirm a recession, there is growing concern about the economy’s loss of momentum.
The report identified seven key short-term risks: declining public and private spending, reduced monetary supply, high interest rates, global trade tariff uncertainty, general price inflation, an unsustainable debt restructuring by the Puerto Rico Electric Power Authority, and a drop in personal consumption expenditures.
“The composite index numbers are powerful tools to measure the economic state and predict turning points,” the analysis noted, highlighting the importance of the Coincident and Leading indexes in examining economic cycles, their causes and impacts on development and policy.
The report concluded by pointing to a long-standing structural imbalance in Puerto Rico’s economy, stating that the IIA confirmed the island no longer responds effectively to traditional stimulus measures.
“The Puerto Rico and U.S. economies have become partially asymmetric due to this structural imbalance, which has started to adjust through public debt restructuring and required fiscal reforms,” it said.
