Itaú BBA - ARGENTINA – Sharp decline in economic activity in 2Q20

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ARGENTINA – Sharp decline in economic activity in 2Q20

August 20, 2020

The lockdown hurt all sectors in 2Q20.

Activity recovered in June, but fell short of expectations. The EMAE (official monthly GDP proxy) grew 7.4% mom/sa, missing both the Bloomberg market consensus and our call of 10.0%. Activity declined by 12.3% on a year-over-year basis. As a result, the EMAE posted a sharp decline of 16.6% QoQ/sa and 19.6% yoy in 2Q20.

The lockdown hurt all sectors in 2Q20. The construction sector plummeted by 63.4% yoy in 2Q20, from -20.8% yoy in 1Q20. Services contracted by 43.8% yoy in the period, vs. -6.9% in 1Q20. Manufacturing fell by 22.0% vs. -6.5% in 1Q20. Finally, Agriculture, Mining and Fishing activity retreated by 11.8% yoy, after falling by 4.8% in the previous quarter.
The broad based contraction was sharper on sequential basis, according to our seasonal adjustment. Activity in the construction sector fell by 95.9% qoq/saar, vs. -36.2% in 1Q20. Service sector output declined by 83.4%, vs. -24.0% qoq/saar in 1Q20. Manufacturing output fell by 47.1% qoq/saar (vs. -11.4%), while primary activity decreased by 15.3% qoq/saar (vs. -7.8%).

We project a GDP contraction of 12.7% in 2020, assuming a gradual sequential recovery in 2H20. We expect spending to normalize in 2H20, with the easing of lockdowns. The outcome of wage negotiations may also help.
Juan Carlos Barboza
Diego Ciongo

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