Central Bank figures show consumption shot up last year, a sign people's standards of living got better

Caracas Daily Journal (Jeremy Morgan): Consumption jumped by 18.7 percent last year, lending weight to government claims that living standards are rising, and helping to boost industrial production. But that may be as far as the good news goes in terms of the overall economy.

Figures from the Venezuelan Central Bank (BCV) show that while industry increased output by 6.9 percent compared with 2006, this marked a slowdown from the 10.1 percent rise seen in 2006. And last year's production increase fell far short of the rise in demand.

Furthermore, expansion in output of food slowed down from an increase of 12 percent in 2006 to one of 9.26 percent in 2007. This coincided with persistent shortages of basic items of food across the country last year. The relative slowdown in growth in the industrial sector sparked a flurry of concern among orthodox economists. Were it not to be reversed, they warned, slower growth or stagnation might hit jobs and fuel inflationary pressures. This, they added, would work against the government's attempt to diversify the economy and wean Venezuela off its overwhelming dependence on oil. Others were of the opinion that unless things changed for the better, so much for the government's hopes of putting the economy irretrievably on the road to sustainable growth.

Economists who harbor misgivings about the government's approach to the economy say the sustainable growth target remains elusive. Some argue that's at least partly the government's own fault.
Critics point to the usual suspects, official controls on prices and foreign exchange. The official exchange rate has been set at BsF2.15 to the dollar since February 2005, and the government insists it's going to stay there throughout this year.

In the meantime, and as has become customary during relatively good times in Venezuela, the gap between supply and demand of consumer goods and other non-oil products was filled by imports. The value of non-oil imports last year totalled $41.172 billion, up by a massive 38.5 percent on 2006 levels.

Of course, not all of this, or even the greater part of it, consisted of luxuries and other expensive toys for the well-off. The BCV reported on a more cheering note that investment rose last year by 24.5 percent to the equivalent of gross domestic product (GDP), much of it going on imports of machinery and equipment for industry.

However, Venezuela evidently still has a credibility problem with foreign investors.
 
They sunk just $646 million in the country last year, well down on the average seen in the years since the economy crawled out of the deepest Venezuelan recession on record earlier this decade. Last year, Venezuela received only a very thin slice of foreign investment in South America.