Recovery strengthening.  Growth remained subdued in the first half of this year, despite the strong hike in the oil prices with GDP up a modest 0.3% and 2.6% in the first and second quarter respectively.  However, more recent economic data releases indicate that the recovery is finally kicking in.  According to the Central Bank industrial production increased 7.5% in August over the same month last year, driven by healthy expansions in virtually all sectors but particularly in the output of textiles, clothing and leather goods (+27.4% yoy); paper and printed materials (+8.3% yoy); and machinery equipment (+8.2% yoy).  Within other sectors, oil production was up 10.9%, output in the metals industry doubled and steel production grew 14.1%.  

Consumption is also clearly on the rebound.  According to Central Bank data, retail sales rose by 29.0% over the same month last year, up from 25.4% in July.  Aside from tobacco sales (-5.2%), all sectors registered double digit growth rates, with machinery parts and home appliance sector exhibiting the strongest expansion with 45.6% and 57.9% respectively.  

National Assembly approves 2001 Budget.  In early November, the National Assembly approved the Chávez government’s fiscal agenda for the coming year.  The US$ 32 billion dollar 2001 budget indicates that the public sector-led growth agenda is slated to continue next year.  Over half of the government’s fiscal initiative is dedicated to social spending but also incorporates important investment initiatives.  The 2001 budget is composed of five key pillars: 

- Infrastructure.  The budget for the Ministry of Infrastructure is expected to double in nominal terms to US$ 2.0 billion.  Funds will be committed principally to building 109,000 new homes; constructing 2,000 new schools; improving the existing transportation network of 1,045 roads and highways; rehabilitating the existing airport system and reconstructing the states destroyed by the flooding last December.

- Health and Social Development.  Of the US$ 2.0 billion (1.8% of GDP) earmarked, the majority is targeted to pension and social security payments (1.1% of GDP) and the balance will flow towards the Social Unity Fund, which primarily focussed on extending health care and food programme coverage.

- Work Programmes.  The government’s labour related spending will reach US$ 1.6 billion (1.4% of GDP) and includes raising the public sector salaries by 10% and increasing labour related social expenditures.

- Education.  The majority of the government’s social spending, or US$ 5.9 billion, up 39.8% from this year, is dedicated to improving the educational infrastructure, including extending food programmes, scholarships and educational loan availability.

- Security and Defense.  The US$ 1.9 billion (1.8% of GDP) in spending is focussed on strengthening the judiciary.

Inflation spikes.  In October consumer prices increased by 0.8%.  The monthly increase lowered annual inflation to 15.1% in from 15.9% in September.  

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