After the freeze: Puerto Rico's economy warms up. (CB Analysis) (Column)

Puerto Rico's economy warms up

You're certainly not alone if you believe Puerto Rico's economy is beginning to warm up -- or if you feel uncertain about how strong the recovery is or how long it will last. Many people are waiting to see a few more months of growth before expanding a business or buying a new home.

"Well, you can stop worrying," the economic indicators seem to be saying.

Since the beginning of the year, nearly all the signs show that this recovery is here to stay.

Granted the recovery has been slow and economic growth is likely to be modest for the next few months, both in Puerto Rico and on the mainland. The fundamentals, however, are there and the recovery shows every sign of being real and sustainable.

One of the reasons the 1992 recovery has not picked up more momentum is because consumers and businesspeople still carry strong memories of last spring, when the short-lived post-war recovery dipped back into recession within a few weeks. No one, it appears, wants to miscalculate again, so caution has become the name of the game.

By all indications, this year is different. Interest rates are much lower, and inflation is safely under control. Real gross domestic product on the U.S. mainland grew at an annual rate of 2% in the first quarter which, while modest, represents the fastest growth in the past three years. There as well as here, a combination of lean inventories and an increase in sales is leading to higher orders for durable and non-durable goods, all of which means more jobs, which, in turn, mean more cash in consumers' hands.

The lower interest rates are also leading to higher disposable income, as companies and individuals spend less in servicing their high debts and as people put money in their pockets by refinancing their homes at a lower interest rate.

Consequently, since the time CARIBBEAN BUSINESS first reported the early signs of the recovery (front page story, March 26, 1992). the positive economic news …