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 in June but remains near historic lows, as does unemployment. While strong economic growth the first quarter 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 a two-percentage point drop from the same month last year, and down half a point from May. In 2005 the jobless rate declined by 6.6 percentage points to finish at 8.9 percent in December. The government does not include part-time workers or those in state-funded social programs in its employment surveys.

The Central Bank of Venezuela (BCV) revealed inflation figures for June rose to 1.9%, a 13-month high up from 1.6% in May. Price increases in the food and beverage sectors contributed to the increase. As did the 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. The annual rate stands at 11.8%, up from 20-year lows of 10.4% in May. The government has set inflation targets of 10% for the year, a figure not reached in Venezuela in decades. Inflation for the whole of 2005 was a reported 14.4%.

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

Moreover, the economy as a whole continued to post remarkable 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 $32 billion. The Venezuelan economy grew at 9.3% in last year.

Even with inflation climbing in June, Venezuelans remain confident in the booming economy. According to recently released figures for the first four months of 2006, the Venezuelan economy continues astounding growth, with reserves up, and unemployment down.