Monthly Economic and Financial Developments, December 2014
Published: Thursday February 5th, 2015
The domestic economy sustained its modest expansion over the review month, supported by improvements in the key tourism sector, while foreign investment projects continued to provide impetus to the construction sector. However, given the limited nature of the recovery, the unemployment rate firmed during the six months to November, while the downward trend in global oil prices constrained inflationary pressures. Buoyed by net foreign currency inflows from the tourism sector, both bank liquidity and external reserves expanded in December.
The ongoing recovery in several key source markets, combined with joint public/private sector promotional campaigns and increased airlift, secured a stable 3.5% expansion in total visitor arrivals to 5.1 million over the ten months to October, when compared with the year-earlier period. After a 6.3% reduction a year ago, the high value-added air segment strengthened by 4.5%, while growth in the sea component slowed to 3.2% from 6.5%. By major port of entry, visitors to the Family Islands improved by 8.5%, outpacing last year’s 0.4% uptick, based on gains in both the sea (9.2%) and air (2.7%) segments. Bolstered by a 43.2% advance in air arrivals, which offset the 8.1% fall in the larger sea segment, the contraction in tourists to Grand Bahama softened by 2.0 percentage points to 2.4%. In contrast, growth in tourists to New Providence slowed to 2.3% from 7.3% in the 2013 comparative period, as the expansion in the dominant sea component tapered to 2.7%, to moderate the reversal in air arrivals from a 6.9% decline to a 1.5% gain.
Indicative of the mildness in the economic expansion, the latest labor market statistics showed the unemployment rate firming by 1.4 percentage points to 15.7% over the six months to November 2014, as the increase in the number of jobless persons exceeded the gain in employed workers. The former reflected, in part, a 6.6% reduction in the number of discouraged workers to 4,560, as the Grand Bahama component fell by just over one-half, outpacing the 22.0% increase in the New Providence segment. The jobless rates in both New Providence and Grand Bahama rose, by 1.0 and 3.9 percentage points, to 16.0% and 18.6%, respectively, while an inaugural survey of the Abaco market—the third highest populated Island—reported an unemployment rate of 20.0%. Reflecting the ongoing challenges being faced by first time job seekers, the jobless rate for persons in the 15-34 year category remained elevated at 31.0%.
Inflation for the twelve months to November—as measured by the Retail Price Index—rose marginally by 90 basis points to 1.2%. This outturn included an acceleration in average price increases for alcohol beverages, tobacco & narcotics and education, to 7.3% and 2.4%, from 3.1% and 1.8% in the same period of the prior year, while transportation costs expanded by 4.1%, after remaining relatively stable in the previous period. Average prices for recreation & culture and communications advanced by 3.9% and 0.5%, in contrast to year-earlier contractions of 0.4% and 2.9%, respectively. Less significant gains of less than 2.0% were noted for health (1.9%), food & non-alcoholic beverages (1.8%), miscellaneous goods & services (1.8%) and furnishing, household equipment & routine household maintenance (1.4%). Providing some offset, average costs for housing, water, gas electricity & other fuels—the most heavily weighted item in the index—fell further, by 0.5%, while average prices for clothing & footwear reversed to a 0.7% decline, vis-à-vis the prior year’s 0.8% advance, and the gain in average restaurant & hotel costs receded by 1.3 percentage points to 2.1%.
Reflecting the pass-through effects of the significant fall in global oil prices over the past six months, domestic energy costs declined during the review month. Specifically, the Bahamas Electricity Corporation’s (BEC) fuel charge contracted by 12.0% month-on-month in December, to 23.50¢ per kilowatt hour (kWh), and was 0.7% lower over the prior year. Further, the price of diesel fell by 6.4% on a monthly basis and by 17.1% year on year, to $4.41 per gallon. Similarly, gasoline costs declined by 7.5% over the previous month, and by 12.9% relative to December 2013, to $4.46 per gallon.
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