Itaú BBA - Evening Edition – Industrial activity declines in Argentina

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Evening Edition – Industrial activity declines in Argentina

April 4, 2019

Industrial activity fell by 8.5% yoy in February 2019, marking its tenth consecutive drop.

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Industrial activity fell by 8.5% yoy in February 2019, marking its tenth consecutive drop. On a sequential basis, manufacturing rose 2.4% mom in February, after growing 4.8% in the previous month. As a result, industrial output fell 4.7% qoq/saar in the quarter ending February, from -19.7% in the quarter ending in January. Looking at the detailed breakdown, activity from all sectors declined in the period, with the exception of tobacco industry. Basic metals fell 34% yoy, followed by machinery and equipment (-31.6% yoy) and car industry (-11% yoy). 

Indec also reported that construction activity fell 5.3% yoy in February 2019, posting the sixth consecutive drop. On a sequential basis, construction grew 8.3% mom in February, after growing 4.6% in the previous month. Employment in the sector rose 2.2% mom, but fell 1.7% against the same month of 2018.

According to the latest Central Bank survey, inflation expectations for 2019 increased sharply. Market participants forecast inflation at 36.0% for this year, up from 31.9% in February (both median value). Inflation expectations for the next twelve months increased to 30.7%, from 29.0% previously. Analysts expect consumer prices to increase by 23.0% in 2020, up from 20.3% in January. Core inflation expectations for 2019 also deteriorated further. Pundits expect core item prices to increase by 35.1% (+5.0 pp over the February survey). Participants adjusted their core inflation projections up to 22.0% for YE20, from 19.1% previously.

In this context, the survey showed that participants expect the yield of Leliqs to hit 45% by end-December, 8pp above the previous survey.


According to Anfavea, auto production reached 241k in March, below our forecast (257k). In seasonally adjusted terms (our estimates), production remained virtually stable. The 3-month moving average increased 5.0%. From a demand standpoint, domestic sales increased 5.2%, marking a third consecutive monthly increase. On the other hand, exports remained stable on a weak level. Our preliminary forecast for March industrial production decreased to -0.8% mom/sa (-5.3% yoy) from -0.5% previously.

Still on activity, supermarket real sales declined 0.9% mom/sa in February, leading the 3-month moving average to decline -0.2%, according to ABRAS. In year-over-year terms, supermarket sales advanced 0.3%. Our forecast for February’s Monthly Survey of Commerce (to be released on April 9th) declined to -0.7% mom/sa from -0.3% in core retail sales. For the broad segment (which includes vehicle and construction material), our forecast receded to -1.0% from -0.7%.


Tomorrow’s Agenda: At 8:30 AM, the central bank will publish the GDP proxy (Imacec) for February. Overall, we expect the monthly GDP proxy to be flat (SA) from January and result in annual growth to tick down to 2.0% (NSA). Nominal wage growth for February will also be released tomorrow, at 09:00 AM.


Tomorrow’s Agenda: March’s inflation data will come out at 9:00 PM. High frequency data for March indicates a month-over-month inflation of 0.44% (0.24% last year), lifted by a sharp rise in food prices as well as elevated beverage, housing and health prices, resulting in annual inflation of 3.22%.

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