Itaú BBA - PERU – Economic activity remained soft in February

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PERU – Economic activity remained soft in February

April 15, 2019

Fishing, construction and metallic mining output were the main drags to economic activity

Economic activity decelerated in the quarter ended in February. The monthly GDP expanded 2.1% year-over-year in February (from 1.6% in January), taking the three month moving average (3MMA) growth rate to 2.9% year-over-year (from 3.9% in January).

Fishing, construction and metallic mining output were the main drags to economic activity in February. Non-natural resource sectors, which account for three quarters of the economy, decelerated to 2.5% year-over-year in February (from 3.6% in January), taking the 3MMA growth rate to 3.4% year-over-year (from 4.1%). Looking at the breakdown, construction output decelerated sharply to 2.4% 3MMA year-over-year (from 5.9%), associated to a fall in public investment in regional and local governments, while national public investment accelerated. Meanwhile, commerce (2.3% 3MMA year-over-year, from 2.5%) and service (4.0%, from 4.4%) sectors slowed by less. In turn, natural resource sectors grew 0.2% year-over-year in February (from -5.2% in January), taking the 3MMA growth rate to 1.0% (from 3.0%). Natural resource sectors was dragged mainly by fishing output, while mining production kept contracting (-1.1%, from -1.7%), associated to a fall in metallic mining, while oil production expanded considerably. In turn, primary manufacturing decelerated (0.1%, from 15.5%).

At the margin, both natural and non–natural resource sectors weakened. Using our own seasonally adjusted series, the quarter-over-quarter annualized growth rate stood at -1.7% (from 3.0% in January) for the full GDP. Looking at the breakdown, both natural resource (-11.0% qoq/saar, from 1.4%) and non-natural resource sectors (0.6%, from 3.5%) weakened.

We expect GDP growth of 4.0% for 2019, assuming that global trade tensions dissipate and a still-expansionary monetary policy, which would offset a lower fiscal impulse. In particular, we expect private investment (mainly from mining) to support economic activity during 2019. Besides global factors, a downside risk for the economy is a prolonged deceleration of public investment at the subnational and regional levels, as most of the newly elected officials who took office in 2019 lack experience (affecting budget execution).
 

Julio Ruiz



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