Monthly Economic and Financial Developments, October 2010

Published: Tuesday December 7th, 2010

Amid the fragile and uneven pace of recovery in the global economy, domestic economic activity continued to stabilise over the review month. Tourism output improved modestly, reflecting gains in the key stopover segment of the market; while public sector projects supported construction output, which continued to be constrained by weak housing and foreign investment led activity. In this context, unemployment would have registered very little improvement, although inflationary pressures continued to moderate from the peak mid-2008 levels. Government’s overall deficit position widened over the first quarter of FY2010/11, as the rise in spending overshadowed the modest improvement in revenues. In monetary developments, both liquidity and external reserves contracted, reflecting the traditional, though muted, firming in foreign currency demand during the final quarter of the year.

Preliminary indicators for the January to September period showed an upturn in tourism activity, as the sector benefitted from the incipient recovery in the United States’ market, as well as public and private sector promotional efforts to boost occupancy rates. Initial data from a sample of hotels in Nassau and Paradise Island revealed that total room revenue increased by 7.5% to $293.2 million, year-on-year, as higher levels of stopover visitors translated into a 2.5 percentage point gain in the average occupancy rate to 66.0% and a similar hike in the average daily room rate, to $236.62.

Consumer price inflation for the twelve months to July, as measured by the Retail Price Index, softened by 3.4 percentage points to 0.9%. Average prices for housing—the largest component of the index—and recreation & entertainment declined by 0.3% and 1.7%, respectively, compared to gains of 2.8% and 3.9% a year earlier. In addition, average inflation slowed for food & beverages, “other” goods & services and furniture & household operations, by 7.7, 5.7 and 3.2 percentage points, to 0.5%; 1.8% and 2.1%, respectively. The remaining categories recorded moderations in average price gains, of less than 2.0 percentage points.

Government’s overall deficit for the first quarter of FY2010/11 widened by $10.8 million (10.7%) to $111.5 million. Higher payments for debt servicing and goods and services elevated total expenditure by $14.2 million (3.8%) to $382.7 million, although capital spending narrowed by 1.7% to $36.9 million and net lending, by 28.2% to $8.1 million. Total receipts improved marginally, by $3.4 million (1.3%) to $271.2 million, due solely to a timing-related increase in non-tax collections, by 29.1% to $29.9 million, as tax revenue fell by 1.4% to $241.3 million, amid persistent softness in private sector demand.

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