May 24 (Bloomberg) -- Venezuela's economy grew for a sixth straight quarter in the January-March period as manufacturers such as automakers Toyota Corp. and General Motors Corp. benefited from a surge in consumer demand.

Gross domestic product, the broadest measure of a country's production of goods and services, expanded 7.9 percent in the first quarter from the year-earlier period after growing a revised 12.1 percent in the fourth quarter, a central bank report showed.

Demand has soared as President Hugo Chavez has taken advantage of a jump in international oil prices to boost government spending by almost 40 percent this year. Demand for cars in Venezuela, the world's fifth-biggest oil exporter, has overwhelmed Toyota, leading to waiting lists of as much as three months for some models.

``The market is explosive right now,'' Enrique Pinochet, Toyota's director of sales and marketing in Venezuela, said in a telephone interview. He forecasts sales will rise 62 percent this year to 40,000 units, which would be Toyota's highest annual sales figure since it arrived in the South American country in 1957.

The waiting list for cars is so long that many buyers have turned to the used market, driving up the price on models such as the Burbuja, a sport-utility vehicle, in that market above the new car price, Pinochet said. Used 2005 models of the Burbuja sell for 120 million bolivars ($55,884), 20 percent more than the price of a new one, he said.

Mercal, Mision Robinson

``People don't want to wait,'' Pinochet said.

Chavez, a 50-year-old former Army lieutenant colonel, ramped up spending 39 percent in the first two months of the year after an increase of 61 percent in 2004, earmarking funds for new programs such as Mercal CA, a grocery chain that sells products at subsidized prices, and Mision Robinson, a literacy program.

Government spending rose to 32 percent of GDP last year from 22 percent in 1998, the year before Chavez took office, according to HSBC Holdings Plc. The price of oil, which accounts for more than half of government revenue and about four-fifths of exports, has almost doubled in New York over the past three years to $49.60 a barrel, funding the spending increases.

``High government spending eventually gets recycled into private hands and this is boosting private consumption,'' said Luis Oganes, an analyst with JPMorgan Chase & Co. He said the restrictions Chavez imposed on dollar purchases in 2003 has made it difficult for Venezuelans to move their money out of the country, prompting them to spend more in the local economy.

Manufacturing, Construction

Manufacturing expanded 6.4 percent in the quarter while the construction industry grew 15.4 percent. The oil industry lagged growth in other parts of the economy, expanding 1 percent as the government struggled to maintain output levels.

In the quarterly report, the central bank also said it revised up the 2004 growth figure to 17.9 percent from 17 percent. The economy rebounded in 2004 from contractions of 8.9 percent in 2002 and 7.7 percent in 2003, when a two-month nationwide strike aimed at ousting Chavez throttled oil output. Chavez, who led a failed coup attempt when he was in the Army in 1992, also defeated a recall vote last year.

Venezuela's benchmark bond due in 2027 fell for the first day in five, dropping 0.25 cent to 98.25 cents on the dollar at 2:55 p.m. in New York. The bond's yield rose 3 basis points, or 0.03 percentage point, to 9.44 percent, according to JPMorgan Chase & Co.

Investment Collapse

Oganes, who forecasts economic growth of 5.5 percent for the year, said he expects the Venezuelan economy to falter when oil prices decline.

``We don't think this level of expenditure is sustainable in the medium to long term if you assume at some point oil prices are going to decline,'' he said.

Investment in the country has tumbled under Chavez, who has implemented state-set price controls on some food staples, fixed the local currency's exchange rate to the dollar and set maximum levels for bank lending rates. Foreign direct investment in the country dropped to $1.1 billion last year from $5 billion in 1998.

``This expansion depends on public spending,'' said Carmen Julia Noguera, an analyst with Banco Mercantil in Caracas.

Some companies, such as Toyota, are investing in the country to take advantage of the consumption boom.

Toyota is investing $10 million this year to boost output by 80 percent at its factory in Cumana, 350 kilometers (218 miles) east of Caracas.

Apartment Prices

General Motors has also seen its sales soar in Venezuela. The company expects sales to rise 78 percent this year to a record 74,000 units, Jose Favarin, who heads the company's local unit, said in a telephone interview.

Overall car sales in Venezuela rose 82 percent to 42,642 units in the first quarter from the same period last year, according to the country's automobile chamber of commerce.

Real estate prices have rebounded in Caracas as the economy has recovered.

The price of a 75-square-meter two-bedroom apartment in El Rosal, a neighborhood in the eastern part of the city, has risen about 25 percent over the past two years to $120,000, said Dinorah Moreno, manager of a Century 21 real estate office in Caracas. Prices had fallen about 40 percent after the nationwide strike, which ended in February 2003.

``We're not yet back to pre-strike levels but the market has definitely turned around,'' Moreno said.

To contact the reporter on this story: Alex Kennedy in Caracas Akennedy1@bloomberg.net

Last Updated: May 24, 2005 14:57 EDT