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Monthly Economic and Financial Developments, September 2013

Published: Wednesday November 6th, 2013

Reflecting ongoing weakness in the key tourism sector, domestic economic conditions remained relatively flat, although with sustained positive contributions from foreign investment-led construction projects. In this context, employment conditions remained challenging, while softness in international oil prices tempered domestic consumer price inflation over the twelve months to September. In the monetary sector, both bank liquidity and external reserves contracted during the review month, partly reflecting the seasonal increase in foreign currency demand in the latter half of the year.

Hotel earnings continued to decline in September, amid softness in the key group segment of the market, increased competition from other regional destinations and a modest decline in airlift capacity. Based on preliminary information, from a sample of large hotels in New Providence and Paradise Island, total room revenues decreased by 12.7% in September from a year earlier, partly due to a contraction in room inventory at five hotel properties. The average occupancy rate decreased by 5.5 percentage points to 40.9%, while the average daily room rate (ADR) fell by 3.6% to $149.99. Similar trends were noted over the nine-month to September period, as the 7.4% reduction in total room revenues was occasioned by a 5.2 percentage point decline in room occupancy to 66.7%, which outpaced the 2.7% advance in the ADR to $239.50.

According to the Department of Statistics’ Labour Force Survey, the jobless rate increased since November 2012, by 2.2 percentage points to 16.2% in May 2013, as an additional 4,715 persons were classified as unemployed. In the underlying developments, the number of discouraged workers was reduced by one-third to approximately 7,970, led by a scaling back in the associated count in New Providence and Grand Bahama, by 26.0% and 47.0%, to 4,085 persons and 2,350 persons, respectively, while the number of employed persons decreased by 1,260 to 163,995. In terms of the major markets, the jobless rate in New Providence grew by 2.8 percentage points to 15.9%, and Grand Bahama’s rate firmed by 1.5 percentage points to 19.5%.

Domestic consumer price inflation for the twelve months to September—as measured by the Retail Price Index of The Bahamas—moderated by 2.3 percentage points to 0.6%, as accretions to average transportation costs—which are directly affected by the moderation in global fuel prices—slowed to 0.6% from 4.4% in the comparative year-earlier period. Average price gains also slackened significantly for furnishing, household equipment & maintenance, by 3.1 percentage points to 0.9%, housing, water, gas, electricity & other fuels—the most heavily weighted component in the index—by 3.1 percentage points to 0.6%, food & non-alcoholic beverages, by 2.5 percentage points to 1.0% and education, by 1.6 percentage points to 1.5%. More muted declines in inflation rates were recorded for medical care & health, miscellaneous goods & services and clothing & footwear to 1.1%, 0.4% and 0.6%, from 2.0%, 0.7% and 1.1%, respectively. Further, the contraction in average communication prices was higher at 4.1% from 0.6% in the previous year, while recreation & culture costs decreased by 1.2%, a reversal from a gain of 0.4% a year-earlier. In a modest offset, average price gains for alcohol, tobacco & narcotics and restaurant & hotel services rose to 2.3% and 2.9% from 1.5% and 2.4%, respectively, in the prior twelve months.

In terms of domestic energy prices, the average cost of gasoline fell marginally on a monthly basis, by 0.2% to $5.43 per gallon in September; however, the price of diesel rose by 1.6% to $5.07 per gallon. In comparison to the prior year, the cost of both fuels fell by 1.9% and 1.3%, respectively. The Bahamas Electricity Corporation’s fuel charge declined by 8.0% to 24.52¢ per kilowatt hour (kWh), on a monthly basis, and by 5.7% year-on-year.

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