|
Private
manufacturing soars in April
In April,
private manufacturing surged 19.9% over the same month last year,
contrasting the 7.9% contraction registered in March, which was negatively
affected by the Easter Holidays. The monthly increase was broad-based, as
all but one of the sixteen categories composing the production index
registered increases over the previous month. In particular, clothing as
well as wood production accelerated notably. As a result of the April
reading, annual average growth in private manufacturing rose from 5.8% in
March to 6.5%. Nevertheless, notwithstanding the rate observed in March,
the April figure constitutes the slowest growth rate in more than four
years.
Government to
take over third largest bank
In July, oil
prices continued to rise albeit at a more moderate pace, as the average
price for the Venezuelan mix of crude oil rose 3.0%, from US$ 118.7 per
barrel in June to US$ 122.3. At the current level, oil prices are 80.0%
higher than the average price registered in the same month last year.
While oil prices are rising, Venezuelan oil production continues to
decline. According to the July report from the Organization of Petroleum
Exporting Countries (OPEC), Venezuelan oil output averaged 2.309 million
barrels per day (mbpd) in June, which was down from the 2.363 mbpd
produced in May. Output is suffering from a lack of investment, primarily
caused by the departure of several foreign oil companies, which left the
country in the wake of the nationalisation of the Orinoco oil belt last
year. Meanwhile, in another effort to increase control over the economy,
President Hugo Chávez on 31 July unexpectedly proclaimed the
nationalisation of Banco de Venezuela, the Venezuelan branch of
Banco Santander. The Spanish bank had previously announced its departure
from the country and was seeking to be bought by private investors. In
addition to the takeover, on 4 August, the president announced 26 new laws
endorsed by presidential decree that enable the government to prohibit or
restrict exports and imports as well as the distribution of certain basic
products. Moreover, the government may impose sanctions for businesses
that refuse to produce basic products that are no longer profitable.
Despite persistently declining investment in the oil and non-oil sectors
of the economy and disappointing first quarter growth figures, the
government expects the economy to rebound and expand 6.0% for the full
year. Planning and Development Minister Haiman El Troudi further stated
that he expects economic growth to average 5.5% throughout the next
decade.
Consensus
Forecast participants don’t share this assessment and expect economic
growth to slow to 5.4% in 2008, which is down 0.3 percentage points from
last month’s forecast. Next year, the Consensus Panel expects economic
growth to moderate further to 4.0% for the full year
Inflation
reaches highest level in over five years
In July,
consumer prices added 1.63% over the previous month. The result was below
the even more pronounced 2.29% price increase observed in June and also
undershot market expectations of a 2.00% increase. Although broad-based,
the monthly price rise was primarily driven by higher prices for
transport, which added 2.01% over the previous month. As a result of the
July increase, annual headline inflation jumped more than a full
percentage point, from 32.2% in June to 33.7%, which constitutes the
highest level in over five years. The core inflation index, which
excludes more volatile items such as fresh food, oil and several other
goods for which the government controls the price level, added an even
more pronounced 1.83% in July. Consequently, annual core inflation rose
from 25.3% to 26.3%. The government has been trying to curb inflationary
pressures by selling debt in order to soak up liquidity. While curbing
consumer demand, the measure has also been relieving pressures on the
bolívar in the parallel exchange market, and consequently, the
currency has been appreciating steadily during the past months. However,
while trying to contain inflation by decreasing liquidity and raising
interest rates, the government on the other hand fails to rein in public
spending. Moreover, public spending is unlikely to diminish at least
until next year, amid windfall revenues from soaring oil prices and ahead
of the regional elections in November. Despite currently rampant
inflation, the government expects inflation to moderate significantly and
end the year at 19.5%. Consensus Forecast participants are sceptical and
anticipate year-end inflation to reach 30.2%, which is up 1.5 percentage
points from last month’s forecast. For 2009, Consensus Forecast
Panellists expect inflation to reach 27.6%. |
