Itaú BBA - PERU – Economic activity improved in October

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PERU – Economic activity improved in October

December 14, 2018

Non-natural resources supported monthly GDP growth

Peru’s monthly GDP figure was above market expectations in October. The monthly GDP expanded 4.2% year-over-year in October (from 2.1% in September), above our forecast (2.8%) and median market expectations (3.1%, as per Bloomberg). As a result, the three-month moving average (3mma) growth rate accelerated to 2.9% year-over-year in October (from 2.3% in September). 

Non-natural resources supported October’s monthly GDP growth.  Non-natural resources sector, which account for three quarters of the economy, accelerated to 4.8% year-over-year in October (from 2.2% in September), taking the 3mma growth rate to 3.3% year-over-year (from 3.1% in September). Looking at the breakdown, also using 3mma growth rates, construction accelerated to 2.1% year-over-year (from 0.7% in September), associated to an acceleration in real gross fixed capital formation of general govt. (after a weak 3Q18). Likewise, non-primary manufacturing grew 3.2% year-over-year in October (from 2.5% in September), while commerce (2.2% year-over-year, unchanged from last month) and services (4.1% year-over-year, from 4.2%) sectors remained resilient. In contrast, natural resources decelerated to 1.5% year-over-year in October (from 2.0% In September), taking the 3mma growth rate to 0.9% year-over-year in October (from -0.7% in September). Inside natural resources sector, also using 3mma growth rates, agriculture (6.6% year-over-year, from 5.4%) and fishing (22.9% year-over-year, from 4.9%) output accelerated, while mining & hydrocarbon (-1.8% year-over-year, from -2.7%) kept contracting.

At the margin, natural and non–natural resources sectors improved. Using our own seasonally adjusted model, the quarter-over-quarter seasonally adjusted annualized growth stood at -0.7% in October (from -4.3% in September). Looking at the breakdown, natural resources (-3.0% qoq/saar in October, from -21.1% in September) and non-natural resources (-0.1% qoq/saar in October, from -1.2% in September) improved, although both kept contracting.

We expect real GDP growth at 3.8% in 2018.  For 2019, we forecast 4.0%, assuming trade tensions dissipate, benefiting metal commodity prices and, consequently, investment, which would offset a lower fiscal impulse. 

 

Julio Ruiz



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