Monthly Economic and Financial Developments, August 2012

Published: Friday October 5th, 2012

Domestic economic conditions continued to be shaped by developments in tourism, foreign investment-led construction activity and public sector infrastructure works, although the momentum and depth of the recovery remained below the levels needed to achieve substantial gains in employment and a broadening of private sector demand. Inflation stayed relatively benign, as local transportation and energy costs declined in August, while the monetary sector outcome showed monthly contractions in both bank liquidity and external reserves, partly reflecting seasonal firming in foreign currency demand.

Indications are that tourism sector activity continued to improve during August, supported by joint public/private sector marketing campaigns, such as the “‘Two Fly Free” promotion and the “airfare credit” programme. When analysed over the eight month period, preliminary data for a sample of large hotels in New Providence and Paradise Island showed a 5.5% increase in room revenues, owing to a 6.4 percentage point gain in the average occupancy rate, to 74.7%, which eclipsed the 3.8% reduction in average daily rates to $238.68, when compared to the prior year. However, the sector’s performance still appeared to trail its pre-recession levels, as room revenues were nearly 10.0% below their 2008 levels.

Reflecting the persistent sluggishness in economic activity, the Department of Statistics’ most recent Labour Force Survey for the six months to May 2012, showed only a 1.2 percentage point narrowing in the unemployment rate, to 14.7%, relative to November 2011, as an additional 3,145 jobs were created over the period, and in comparison to May 2011, the jobless rate was 1.0 percentage point higher. The underlying challenges in the labour market, were also evident in the number of discouraged workers, which declined by 3.0% over the six-month period, but remained 9.0% above May 2011’s level. With respect to the main labour markets, the unemployment rate in New Providence fell to 14.0% from 15.1% and for Grand Bahama, to 17.3% from 21.2%.

Domestic energy price movements were mixed in August, as gasoline prices declined marginally by 0.2% over the month and by 3.3% year-on-year to $5.26 per gallon. In contrast, diesel costs moved higher by 1.2% to $4.87 per gallon, but contracted by 4.1% relative to 2011. Further, the Bahamas Electricity Corporation’s fuel charge declined by 3.7% during the month, to 27.45¢ per kilowatt hour (kWh), but still exceeded the previous year’s level by 5.6%.

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