Federal Reserve Economic Data

Venezuela has all but vanished from the news as the rest of the world grapples with its own problems. In this blog post, we document the state of Venezuela’s economy through FRED graphs. This has been no easy task, since recent data are actually quite scarce. And we’ll explain a second reason below.

Even just glancing at our first graph reveals there’s trouble. The economy has been in an unprecedented decline, with GDP below the level it was in 1970. That kind of economic suffering indicates major problems.

One problem is clearly inflation—or, more accurately, hyperinflation. Our second graph shows the exchange rate of the Venezuelan currency against the U.S. dollar. For most of the time period shown, the line cannot be distinguished from zero because the recently skyrocketing rate has rendered previous changes minuscule in comparison.

Also note the blip in 2018, which was a rapid increase from about 10 bolivares to the dollar in January to about a quarter of a million bolivares by August. Clearly, an economy with such price increases has been structurally disrupted. Hyperinflation also makes it even more difficult to measure economic activity, as measurement at these price levels becomes misleading. This is our second obstacle, which we alluded to above. While it’s clear economic activity has slowed down in Venezuela, there’s no way to say with any precision by how much exactly.

Our next graph shows total factor productivity—in short, a measure of how much is produced with a constant level of capital input and labor. Clearly, Venezuela’s problems are not recent; they date back to the 1970s. Again, while any measurement must be taken with a grain of salt, it’s extremely rare for an economy to show a decline over decades. Something is impeding productivity.

The clear loss of population in recent years also affects the Venezuelan economy. The graph includes a red “what if” trend line showing that the population would have been 4 million (or 14%) higher in 2020. Obviously, the direction of the causality between population loss and output loss is not clear: That is, did the bad economy cause lower population or the reverse? Either way, an economy with that many fewer people will produce much less.

To make things worse, fewer people are working among those who remain in Venezuela, with the labor force participation now below 50%. With all these economic hardships, it’s not a surprise Venezuela is one of the few countries in the world where cellular subscriptions are in decline, as shown in our last graph.

How these graphs were created: Search FRED for Venezuela, sort results by observation end, then click on series titles of interest. The only graph that requires additional adjustment is the one for population: To add the trend, go to the “Edit Graph” panel and open the “Add Line” tab; click on “user-defined line,” and enter values defining start and end of the new line.

Suggested by Christian Zimmermann.

The FRED graph above shows average weekly hours worked per worker in the United Kingdom since the year 1260.

Clearly, measuring the work week is a long-standing tradition for the British. It is also a long-standing challenge for economists, but accurate measures matter for at least two reasons: First, hours worked determine the time available for leisure and, thus, matter for welfare. Second, the measurement of productivity depends crucially on the measurement of hours worked.

Consider the Industrial Revolution in England, which is generally dated as the second half of the eighteenth century to the first half of the nineteenth century. Did this Industrial Revolution occur because of innovations and technological progress or because workers were working longer hours than before? The graph suggests that between 1750 and 1800, workers in the U.K. worked more than ever, indeed. So, innovations and technological progress may not be the only drivers of the Industrial Revolution.

The decline in hours worked in the U.K. since the first half of the nineteenth century is also remarkable and similar to what is observed in most of today’s developed economies. To get a sense of the importance of this decline, note that hours worked in 2016 are half what they were in 1830. We don’t show it here, but real gross domestic product per worker rose 12 times in the same time frame. Simply put, since 1830, U.K. workers are able to work half the time but produce 12 times as much.

History buffs out there may want to look a bit farther back at the steep decline in the fourteenth century, the time of the bubonic plague. For some dismal science on that period, check out this post.

How this graph was created: Simply search for and select “Average Weekly Hours Worked in the United Kingdom.”

Suggested by Guillaume Vandenbroucke.

As the pandemic began in early spring of 2020, the U.S. economy faced significant supply disruptions: Many local and state governments mandated the shutdown of non-essential production of goods and services to various degrees.

Although production declined, American households still demanded goods as part of their daily lives. Income support from the federal government also bolstered the purchasing power of many households, and thus there was much less of a contraction in total demand than would have occurred otherwise.

So, where do the goods that are consumed in a given month, quarter, or year come from, if not from production? Here we focus on one channel: inventories—specifically, the change in inventories, also called inventory investment. This is the difference between production and sales over an interval in time. Inventory investment includes materials, works in progress, and finished goods.

Early in the pandemic, there was a tremendous drawdown of the nation’s inventories. The change in inventories (which is negative when inventories are falling) is one component of a nation’s investment, which in turn is one component of that nation’s gross domestic product. The change in inventories (seasonally adjusted annual rate) went from a modest –$20.6 billion in the first quarter of 2020 to –$289.9 billion in the following quarter. This was the all-time low for this measure. As is often the case as an economy recovers from a recession, the change in inventories bounced back quickly into positive territory in the third quarter of 2020.

How this graph was created: Search for and select the “change in private inventories” series from 1947 to the present. Adjust the time interval using the options available (the slider below the graph or the boxes in the upper right-hand corner) to zoom in on the pandemic period.

Suggested by Bill Dupor.