Venezuela’s Economy Posts Strong First Quarter

Last week the Central Bank and National Statistics Institute released quarterly figures to suggest Venezuela’s strong economic performance continues in 2006. Inflation climbed to 11.8% in June, but remains near historic lows, as does unemployment, at 9.7%.

Last week the Central Bank and National Statistics Institutereleased quarterly figures to suggest Venezuela’s strong economicperformance continues in 2006. Inflation climbed in June but remains nearhistoric lows, as does unemployment. While strong economic growth the firstquarter of this year added to international reserves and consumer confidence.

The nation’s unemployment rate fell in June to 9.7%,according to the National Statistics Institute (INE). The number reflects atwo-percentage point drop from the same month last year, and down half a pointfrom May. In 2005 the jobless rate declined by 6.6 percentage points to finishat 8.9 percent in December. The government does not include part-time workersor those in state-funded social programs in its employment surveys.

The Central Bank of Venezuela (BCV) revealed inflationfigures for June rose to 1.9%, a 13-month high up from 1.6% in May. Priceincreases in the food and beverage sectors contributed to the increase. As didthe 66% increase in government spending the first four months of the year,which pushed up the money supply further adding to inflationary pressure.Still, the first quarter numbers stand at 5.5%, the lowest since 1986. Theannual rate stands at 11.8%, up from 20-year lows of 10.4% in May. Thegovernment has set inflation targets of 10% for the year, a figure not reachedin Venezuelain decades. Inflation for the whole of 2005 was a reported 14.4%.

Despite the recent increase in inflation, consumerscontinued to show great confidence in the economy. According to the VenezuelaAutomotive Chamber (CAVENEZ) new car sales in June rose 38.5% over the samemonth in 2005, and 13.2% over May sales. A total of 28,968 new cars were soldin June, a strong indicator of solid economic health and consumer confidence.

Moreover, the economy as a whole continued to postremarkable growth. The Central Bank reports the nation’s economy grew at 9.4%in the first quarter of this year and international reserves increased to over $32billion. The Venezuelan economy grew at 9.3% in last year.

Evenwith inflation climbing in June, Venezuelans remain confident in the boomingeconomy. According to recently releasedfigures for the first four months of 2006, the Venezuelan economy continuesastounding growth, with reserves up, and unemployment down.