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Historically high oil prices appear not to be
translating into robust growth in the oil economy. Instead, the non-oil economy is experiencing a strong
recovery from last year’s recession.
Declining unemployment and lower interest rates are helping propel
private consumption, whereas investment recovers more gradually amid the
slow easing of exchange rate controls.
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Economic
growth remains robust
In
the third quarter, gross domestic product (GDP) grew 15.8% over the same
quarter last year.
The third quarter figure was well ahead of market expectations of
9.8% growth and even slightly exceeded the 15.1% expansion observed in the
prior quarter.
A healthy surge in public sector output of 11.2% over the third
quarter last year (Q2: 8.4% year-on-year) provided a strong push to the
third quarter expansion.
Private sector activity also remained robust with 17.4% growth (Q2:
17.4% yoy).
Non-oil
sector drives economic growth
Despite
the robust oil price, the non-oil economy actually put in a stronger
performance in the third quarter than the oil economy.
Construction remained the fastest growing sector with growth
reaching 40.3% over the same quarter last year.
The third quarter figure was up from the already robust 27.4%
expansion observed the prior month.
The financial service industry also exhibited strong growth of
27.2% (Q2: +32.1% yoy) and the transportation/storage sector added 25.5%
over the same quarter in 2003 (Q2: + 28.6% yoy).
In fact, with the exception of mining and electricity/water, growth
was in double digits in all sub-sectors of the economy.
Activity
in oil economy slows unexpectedly
The
oil sector grew a modest 2.7% in the third quarter over the same quarter
last year.
The figure was below the 3.2% expansion the prior quarter and
appears to have initiated a declining trend in activity.
The slowdown in the oil sector is surprising, as the average price
of the Venezuelan basket of crude oil reached US$ 36.43 per barrel in the
third quarter, which was 47.2% above the level observed for the same
quarter last year.
Furthermore, data from Organization of the Petroleum Exporting
Countries (OPEC) indicate that average oil production reached 2.6 million
barrels per day in the third quarter, which was virtually unchanged from
the same quarter last year.
Healthy
domestic demand helps drive economy
Even
though the government does not elaborate quarterly aggregate demand and
supply data, recent indicators show that domestic demand continued to
proceed favourably in the third quarter.
In August, national retail sales were up 28.7% over the same month
last year.
The August reading represented the ninth consecutive month of
double-digit year-on-year growth but was slightly below the 28.8%
expansion registered in July.
Automotive vehicle (+94.2% year-on-year), pharmaceutical/medical
supplies (+50.7% yoy) and supermarket (+36.8% yoy) sales experienced the
strongest growth in August.
Clothing and household appliances, on the other hand, saw sales
decline over the same month last year.
Trade data confirm the healthy surge in consumption.
In the third quarter, imports of consumption goods rose 66.4% over
the same quarter last year, which was down from an unsustainable 107.0%
growth rate observed the prior quarter.
Declining
unemployment spurs private consumption recovery
The
resilience of economic growth, in particular construction and
manufacturing, is complemented by favourable developments in employment.
In October, unemployment reached 13.7%, 3.0 percentage points below
the rate observed in the same period last year and well below the 14.5%
registered in the prior month.
In the coming months, seasonal hiring should help the unemployment
rate to decline further, which should provide and additional push to
private consumption. |
