VenAmCham: Venezuelan families reduced consumption in May

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Friday, June 20, 2003 By: Jose Gabriel Angarita

VenAmCham economist Jose Gabriel Angarita writes: Venezuelan families are being more and more adversely affected by the kind of economic management to which we are being subjected. According to information published in the El Nacional and El Universal newspapers, the National Association of Supermarkets and Similar Businesses (ANSA) reported that supermarket sales were up 15% in nominal terms between May 2002 and May 2003. In real terms, however, consumption at supermarkets contracted by 16.1%, because the cumulative inflation rate between May 2002 and 2003 was higher, amounting to 35.1%.

Furthermore, comparing real growth in the first quarter of 2003 with that of the same period of 2002, we find that consumption was 26% lower this year, a plunge provoked by the period's intense political, economic, and social instability. Nevertheless, the industry organization indicated that most member establishments abided by the controlled prices, despite that policy's impact on their profit margins.

ANSA also pointed out that, though there were no serious cases of supply shortages, the variety of consumer goods on supermarket shelves has diminished, especially for the products subject to regulation. The outcome is the appearance of a black market where the goods in question are being sold at double their controlled price, which only intensifies the distortions in the price formation system.

Among the most dramatic consequences of the economic situation into which we have been dragged by an accumulation of inefficient economic policies is the decline of real salary levels. The Venezuelan public's loss of purchasing power as a result of rising inflation, unemployment, and the economic crisis as a whole has forced families to reduce their consumption of essential goods. And the prospects for a 50% inflation rate and an unemployment rate over 25% by the end of the year will only make things worse.