Monthly Economic and Financial Developments, December 2018

Published: Monday February 4th, 2019

Overview

Indications are that the domestic economy maintained its modest pace of growth in December, and was improved overall for 2018.  Output was supported by ongoing gains in tourism, while foreign investment projects continued to fuel construction sector activity. The economy's uptrend was evident from strongly elevated foreign currency inflows through the banking sector and equally robust demand, evident in external payments for goods and services.  The environment sustained further employment gains, although paced slower than active labour force growth, both during the six-months to November and in the year-over-year comparisons.  In monetary developments, bank liquidity contracted during December, as the falloff in total deposits outstripped the decline in credit, with a resulting reduction in external reserves. The latter reflected elevated public sector demand, for refinancing of foreign currency debt with domestic funding.

Real Sector

Tourism    

The improvement in tourism, which occurred during the year, was sustained during the final month of 2018, with both the airline and hotel accommodation indicators showing strong gains.

The latest data from the Nassau Airport Development Ltd. (NAD), showed that total departures-net of domestic passengers-rose by 12.3% in December, extending the 5.1% increase a year earlier. This was underpinned by a 13.4% gain in US departures, compared to the previous year's 3.4% growth. Further, the non-U.S. international component rose by 6.8%, albeit a slowdown from the prior period's 14.5% expansion. Similar trends were evident over the twelve-month period, as total departures strengthened by 13.8%, vis-à-vis a 0.8% softening in the previous year. There were corresponding recoveries in both U.S. and non-U.S. international traffic, of 13.2% and 17.4%, from declines of 0.6% and 1.8%, respectively, a year earlier.

In terms of the non-traditional accommodation market, short-term rental demand continued to strengthen during December 2018.  The latest data from AirDNA revealed a 27.0% increase in the total available listings and a 33.0% advance in total bookings, relative to the same period last year. Notably, higher booking rates were observed in all of the major markets, as the number of room nights sold in Abaco, Exuma and Grand Bahama, grew by 76.6%, 46.0% and 44.7%, respectively. Comparatively, New Providence, which features considerably more inventory across accommodation types, firmed by 21.9%. Moreover, the average daily rate (ADR) for entire place listings-which tends to be more comparable across periods-rose by 1.8% to $356.31 per night, while the cost of hotel comparable listings fell marginally by 0.3% to $146.59 per night. For the year, the total number of room nights sold increased by 42.2% when compared to 2017, amid robust gains for Exuma (55.9%), Abaco (55.8%), and Grand Bahama (52.7%), as well as improvements for New Providence (25.7%).  Further, over the 12-month period, the ADR for entire place listings firmed by 3.8% to $333.29, while listings which were comparable to hotel rooms, rose by 1.3% to $138.40.

Employment

Reflecting mainly the improving economic conditions, preliminary data from the Department of Statistics' Labour Force Survey for November, revealed a 3.4% rise in the number of employed persons, when compared to November 2017, and a 1.1% gain relative to May 2018, amid increased private sector employment.  Nevertheless, with the growth in the active labor force outpacing job gains, the overall unemployment rate rose by 70 basis points vis-à-vis May 2018, and by 60 basis points compared to November 2017, to 10.7%.

A breakdown by island showed that the uptick in the jobless rate was due solely to developments in the New Providence market, which firmed by 1.0 percentage point to 11.0% over the six-month period, and by 40 basis points relative to the same period in 2017. In contrast, the unemployment rate in Grand Bahama fell by 50 basis points over May and by a smaller margin of 20 basis points, on an annual basis, to 11.9%. Similarly, in Abaco, the jobless rate contracted by 3.0 percentage points over the six-month period to 7.7%, and was 90 basis points lower than November 2017.

Prices

During the twelve months to September, retail price inflation rose to 1.98% from 1.34% in 2017, reflecting the pass-through effects of the 4.5 percentage points rise in the VAT rate on 1st, July.   In terms of the components, restaurant & hotels, recreation & culture and food & non-alcoholic beverages, reported upticks of 4.99%, 3.86%, and 2.44%, respectively, a reversal from the reductions recorded in the prior year. Likewise, the rate of inflation also accelerated for transportation (4.86%) and health care (1.77%).  In contrast, the rise in average costs for housing, water, gas and electricity costs-the largest category-slowed by 1.1 percentage points to 2.4%, and contracted in the components for clothing & footwear, furnishing & household equipment and education, following price increases in 2017.

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