Bermuda's economy was generally flat in the second quarter of the year, with tourism arrivals and expenditure holding steady compared to last year, housing construction down and international company registrations continuing a downward trend that began in the middle of 2000.

Government's Quarterly Bulletin of Statistics for the three months to the end of June painted a picture of an economy still struggling to bounce back from a dismal tourism year in 2001 and the global economic downturn.

Tourism arrivals for the period were up 3.3 percent or 5,638 to 168,644 compared to 2001, but most of the increase was attributed to cruise ship arrivals which jumped 9,917 or 15.9 per cent to 71,986.

Air arrivals dropped 1,279 or 1.2 percent for the period.

The decline in the higher spending air arrivals translated to a marginal increase in overall visitor spending, which rose 2.5 percent from $131 million in 2001 to $134.4 million this year.

Air visitor spending rose from $117.3 million to $118.1 million with spending on accommodation and food up 2.4 percent to $76.4 million and outlays on shopping, entertainment and food down 2.3 percent to $1.7 million.

While tourism spending was up marginally compared to last year, the figures are considerably lower than those recorded in 1999 and 2000 when visitors spent a total of $170.1 million and $159.5 million respectively, said Opposition Leader and Shadow Finance Minister Grant Gibbons.

"In terms of tourism, we are seeing an economy that has not improved at all from the previous year and visitor spending, while relatively flat, is still very poor as last year was the worst for tourism in three decades," he said.

Employment levels in the hotel industry fell by two people to 3,090 and are down by almost 1,000 or 25 percent compared to employment in 1999 when 4,062 people worked in hotels, cottage colonies and guest houses.

Figures for construction activity in the period were not available, but the number of homes completed in the quarter dropped from 95 last year to 60 this year.

In the first half of the year, 131 homes were completed compared to 150 last year, suggesting the building boom which has helped to sustain the local economy is starting to cool.

Spending by all measurements was generally flat in the quarter as well.

Imports jumped 4.1 percent to $191 million in the quarter, but almost all of the increase was attributed to a huge jump in fuel imports, which tend to be very erratic from one quarter to the next.

Spending on food, beverages and tobacco, clothing and construction materials all fell in the quarter.

The value of retail sales rose 1.1 percent, but fell in real terms after inflation was taken into account.

Overseas purchases declared by returning residents were virtually flat, increasing from $9.308 million to $9.309 million.

International company registrations, a key indicator for the health of the sector, continued to decline in the second quarter.

Just 231 exempted companies registered in the second quarter compared to 289 in the first quarter and 325 in the second quarter of 2001. Exempted company registrations have been in a steady decline since the second quarter of 2000, when 497 companies registered.

The number of companies on the Register also declined, falling to 11,806 in the second quarter, a decline of 319 from the first quarter, and the lowest number on the Register since the second quarter of 2000.

Dr. Gibbons said: "I suspect we are seeing a direct concern about incorporations in offshore jurisdictions and some of the bad publicity Bermuda has gotten as a consequence of its association with corporate inversions and aggressive accounting practices generally.

"It demonstrates that we probably have to do a lot of work to rebuild our image as a first rate and well regulated international business jurisdiction with decision-makers in Washington and elsewhere."

But Association of Bermuda International Companies chairman David Ezekiel (pictured) said his members had not seen any effect from the controversy over corporate inversion yet.

He said he was reluctant to comment on what may have caused the decline in incorporations, except to say that some parts of the sector were very competitive.

"I am told that competition in the trust company area is very hot and price sensitive between jurisdictions," he said.

"But in terms of Bermuda's bread and butter business, the captive insurance companies and the physical presence companies that are the main drivers of international business, we don't see any cause for concern at this stage."

"Nor does it signal a fall-out from all of the controversy in the press," he said. "We have not seen anyone interested in doing business in Bermuda change plans.

"For example, we as a firm have two or three substantial firms forming.

"And what may not show up in the figures are companies that were not doing much in the past four or five years starting to increase their activity and issue insurance cover for their parent companies and so on.

"We are seeing that (as insurance premiums from commercial reinsurers rise)."