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Domestic
demand remains strong
According
to the Central Bank, the non-oil economy is also proceeding along a strong
expansion trajectory.
In May, private manufacturing industry output rose 24.8% over the
same month last year.
The May reading was above the already robust 24.0% and brought the
trend of decelerating output growth to a temporary halt.
The strong output expansion in leather goods (+210.6% year-on-year),
automotive vehicles (+153.2% yoy) and wood products (+138.2% yoy) helped
bolster May manufacturing output.
The only sub-sectors in private manufacturing to experience
declines were basic metals (-7.0% yoy) and machinery/electrical apparatus
(-6.8% yoy) production.
Consensus Forecast participants expect the growth pace to
decelerate but anticipate annual growth to reach 12.2%, which is up 1
percentage point from last month’s forecast.
Consumption
maintains strong expansion but slows moderately
Private
consumption also continues to grow at healthy rates.
In May, retail sales volume, including automotive vehicles, rose
21.0%, which was down moderately from the 23.5% expansion observed the
prior month.
Automotive vehicle, supermarket and drug store sales experienced
the strongest expansions of 81.8%, 51.0% and 47.8% respectively over May
2003.
On the downside were clothing and shoe (+0.9% yoy) along with
household item sales (-22.5% yoy).
The pronounced nature of the recent economic recovery is partly
overstated by the very low comparison base last year, when the economy
came to a standstill as the result of a two-month nationwide strike
against the Chávez administration.
Nonetheless, some economic fundamentals have also improved, namely,
the stability of the currency, the moderation of inflation, gradually
declining interest rates and lower unemployment.
Outlook
improves amid favourable oil developments and sustained growth in domestic
economy
Consensus
Forecast participants have again undertaken a notable revision to the
growth estimate for this year, as oil prices have remained persistently
high and domestic demand growth is being sustained at healthy levels.
Gross domestic product (GDP) is now expected to grow 9.1% this year,
which is up 0.8 percentage points from last month’s forecast and puts
Venezuela at the helm of the Latin American region this year.
Next year’s outlook, however, remains unchanged at 3.5%, as oil
prices are expected to drop and interest rates to rise amid a high
inflationary setting.
Inflation
moderates despite pick up in economic activity
In
July, consumer prices rose 1.38%, which was in line with market
expectations and came in below the 1.85% reading the prior month.
Strong price increases in household equipment and household
services accounted for the lion share of the July increase in consumer
prices.
As a result of the July reading, annual inflation dropped from
22.3% in June to 21.8%.
Despite the favourable July figure, Consensus Forecast panellists
anticipate annual inflation to rise this year, as the anticipated exchange
rate devaluation would raise the pressure on domestic prices.
As a result, annual inflation is expected to rise to 27.5% by the
end of the year.
Inflationary expectations, however, continue to improve, as shown
by the 1.6 percentage point downward adjustment to the inflation estimate
by panellists over last month’s forecast.
Nevertheless, the current Consensus Forecast figure still remains
above the government’s 26.0% estimate.
Next
year, the Consensus expects inflation to moderate but remain high at
25.4%, which is up 0.9 percentage points from last month. |
