Monthly Economic and Financial Developments September 2018
Published: Monday October 29th, 2018
Overview
The domestic economy’s mild growth trajectory was maintained during September. Activity was underpinned by the ongoing gains in tourism, amid increases in high-end hotel inventory and airline seat capacity, while construction sector output was driven by several varied-scale foreign investment projects. On the prices front, average energy costs firmed modestly, due mainly to the increase in global oil prices. In monetary developments, bank liquidity contracted, amid an increase in commercial bank credit to Government and a reduction in domestic deposits. External reserves also fell, in line with seasonal factors and heightened public sector demand for foreign currency—related mainly to fuel imports.
Real Sector Tourism
Tourism sector indicators showed a notable improvement during the review period, supported in part by sustained growth in several key source markets and a relatively mild hurricane season.
Official data from the Ministry of Tourism (MOT), revealed a 5.4% expansion in total visitor arrivals during the first eight months of the year, a reversal from a 2.8% contraction in the prior period. The improvement was driven by the high value-added air segment, which advanced by 15.1%, following a 6.3% reduction in the prior period. Further, sea passengers firmed by 2.4%, relative to a 1.6% softening in 2017.
By major port of entry, air arrivals to New Providence firmed by 17.2%, a reversal from a 5.7% falloff recorded a year ago. However, the higher volume sea component, contracted by 10.6%, resulting in a 2.8% decrease in total visitors, vis-à-vis 2017’s 4.6% uptick. In Grand Bahama, total arrivals rose by 8.6%, in contrast to a 29.1% plunge in the prior period, amid gains in both sea and air traffic of 9.4% and 2.5%, respectively. Further, the Family Island market continued to exhibit strong growth, with increases in the sea and air components of 22.1% and 11.5% respectively, resulting in a turnaround in total arrivals to a 20.3% expansion, from a 3.0% deline in the preceding year.
In terms of more recent tourism performance indicators, data from the Nassau Airport Development Company Ltd. (NAD) for September, revealed a 42.3% expansion in tourist departures—net of domestic passengers—in contrast to a 22.7% decline a year earlier, when Hurricane Irma disrupted travel itineraries. In the underlying developments, US departures in September rebounded by 44.7%, following a 23.2% reduction in the prior period. Similarly, non-US international traffic grew by 30.5%, relative to a 20.5% fall in 2017.
Similar trends were noted over the nine-month period, as total departures recovered by 13.4%, from a 3.0% decline in 2017. There were gains in both US and non-US international traffic of 12.7% and 17.9%, respectively, vis-à-vis contractions of 3.0% and 3.2%, in the previous year.
In line with the strengthening in air arrivals—as well as an increase in the number of listings—data from AirDNA revealed a 51.4% strengthening in total bookings in the short-term rental market, relative to the same period in 2017. Bookings in Abaco improved by 88.9%, led by an expansion in rental of entire units as opposed to segmented use of units (including specified rooms), while reserved listings for Grand Bahama, the Exumas, and New Providence, advanced by between 40% and 60%. In terms of the average daily room rate (ADR)—which is more comparable between periods—the data showed that the rates for entire place listings firmed by 8.2% to $284.37 per day; however, those for private rooms (hotel comparable) listings, fell by 3.8% to $126.34 per day.
Over the nine-month period, total booked residential listings increased by 43.1%, in comparison to 2017, with both the entire place and private room bookings up by 42.6% and 32.6%, respectively. In addition, the ADR for both entire place rentals and hotel comparable rooms, rose by 5.2% and 2.2% to $337.57 and $139.36, respectively.
Prices
Reflecting the pass-through effects of elevated global oil prices, domestic energy costs firmed during the review period. Specifically, in September, the Bahamas Power and Light’s (BPL) fuel charge increased by 9.7% to 19.15 cents/KWH relative to the previous month, and firmed by 52.2% year-on-year. At the fuel pump, price developments varied, as gasoline costs softened by 0.8% to $4.91 per gallon, while diesel prices edged up by 0.2% to $4.58 per gallon. However, both gasoline and diesel costs firmed by 13.9% and 19.3%, respectively, relative to the previous year.
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