The Economic Activity Index (EAI) is a measure of the island economic activity calculated by the Economic Development Bank of Puerto Rico. It is based of four macroeconomic indicators, Total Non-Farm Payroll, Electric Power Generation, Gas Consumption and Cement Sales. Altogether these indicators closely model trends in the islands production, because of this, changes in this index are indicative of changes in the output of the Puerto Rican Economy.
The economic activity index reached 125.4 in March 2022, its highest point since February 2016. When compared to February 2022 the EAI increased by 0.4%, meanwhile when compared to March 2021 the EAI increased by 3.9%.
According to the Economic Development Bank total-nonfarm payroll, the first subcomponent of the EAI decreased slightly when compared to the previous month, but remains at a higher level than in March 2021. When compared to February 2022, total non-farm payroll decreased by 0.4% after increasing for 22 consecutive months. Meanwhile, when compared to March 2021 total non-farm payroll increased by 5.6%.
The data released by the Bank of Economic Development, shows total non-farm payroll at its second highest point since May 2014. These high employment figures have been driven by large increases in employment in Leisure and Hospitality (16.7%), Professional and Business Services (8.4%), Minning Logging and Construction (7.5%) and Manufacturing (75).
Electric power generation, the second index subcomponent, reached 1,603.2 kWh. This figure represents a 2.8% increase in power generation when compared to February and a 0.5% increase when compared to March 2021. Even though the price per barrel of oil in March 2022, was roughly double that of March 2021 there has been little change in Power Production when compared to a year prior. This is because electricity is considered an inelastic good, meaning that changes in prices affect have a proportionally smaller impact on consumption. This to say that despite historic increases in oil prices, we can expect proportionally lower changes in power consumption over the coming months.
A similar thing can be said about gasoline consumption, the third subcomponent of the index, which reached 73.7 million gallons in March 2022. Gasoline consumption decreased 0.3% in March 2022 when compared to the previous month and increased by 6.7% when compared to March 2021. As stated previously, this happened in a month where peak oil prices were roughly double of those of on year prior.
Finally, cement sales, the fourth index subcomponent, totaled 1.2 million 94-pound bags. This represents a 6.2% increase when compared to February and a 9.3% decrease when compared to March 2021. It is also worth noting that this is the highest cement sales have been since March 2021 and sales are still above pre-pandemic levels.
Overall, the output of the Puerto Rican economy has increased following the COVID-19 pandemic, so much so that the EAI currently sits at its highest point in 74 months. All index subcomponents increased on a yearly basis, except for cement sales which despite a yearly decrease still saw the highest sales figures from April 2021 to March 2022. We could see economic activity increase further in the coming months as federal funds for reconstruction aredisbursed.