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The cyclical recovery from last year’s recession
remains in place and is not decelerating as rapidly as anticipated earlier.
The oil sector of the economy, which is benefiting from high oil
prices and rising output levels, provides the key explanation for the
persistence of strong growth. Nevertheless, domestic demand also recovers strongly, as
interest rates and unemployment are gradually declining.
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Healthy
domestic demand helps drive economy
While
official data for the third quarter have not yet been released, it is
evident that the economy remained on a strong expansion path, as recent
indicators show that domestic demand is recovering strongly.
National retail sales rose 28.0% in July over the same month last
year.
The July figure represented the eighth consecutive month of robust
double-digit year-on-year growth and was even slightly above the 26.6%
growth rate observed in June.
The strongest growth rates were observed in automotive vehicle
(+88.2% year-on-year), supermarket (+53.6% yoy), pharmaceutical/medical
supplies (+51.3% yoy) and clothing (+41.4% yoy) sales.
On the downside motorcycle-related sales were unchanged over July
last year.
The robust growth trend appears to have continued beyond the third
quarter, since the Venezuelan Automobile Chamber (CAVENEZ, Cámara
Automotriz de Venezuela) reports that automobile sales rose 120.8% in
October over the same month last year, which was down from the 145.0%
increase observed in September.
Private
consumption benefits from lower unemployment and credit easing
Declining
unemployment, decelerating inflation and the easing of credit are key
factors behind the current recovery in private consumption.
According to the Superintendence of Banks and Other Financial
Institutions (SUDEBAN, Superintendencia
de Bancos y Otras Instituciones Financieras), consumer loans increased
102.3% in September over the same month last year, which was up from the
already robust 91.5% growth rate registered in August.
Unemployment dropped to 14.5% in September, which was up moderately
from the 14.2% observed the prior month.
Nevertheless, the annual average unemployment rate continued its
downward trend and dropped from 16.1% in August to 15.8% in September.
The current average unemployment rate is now well below the 18.4%
rate registered in the same period last year.
To a large extent the current downward trend in unemployment is
attributable to the recovery in the labour-intensive construction industry
but also increasingly manufacturing.
Oil
sector provides additional growth impetus to non-oil economy’s rebound
In
October, oil prices continued along a clear upward trend.
The price of the Venezuelan basket of crude oils reached US$ 43.45
per barrel at the end of October, which was well above of the US$ 39.86
per barrel price observed at the end of September and 28.3% above the
levels observed in the same month last year.
As a result, the average year-to-date price reached US$ 33.48 per
barrel well ahead of the government’s budgeted oil price of US$ 18.50
per barrel for this year, which should provide additional resources for
increased public sector spending.
Continued uncertainty in the Middle East, concerns about inventory
levels in the United States and a strike in the Nigerian oil sector were
key factors behind the October price spike.
Despite several output increases by member countries of the
Organization of the Petroleum Exporting Countries (OPEC) this year, the
current oil price remains above the official OPEC price band of US$ 22 to
US$ 28 per barrel used to guide production levels.
Starting 1 November 2004, members raised production levels by 1
million barrels per day (mbpd), which brings Venezuela’s quota to 3.1
mbpd from 2.9 mbpd.
Given that oil prices remain at historical highs, the increase in
the Venezuela production quota will further benefit economic activity in
the oil sector and the overall economic recovery. |
