Itaú BBA - PERU –Gradual recovery continued in August

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PERU –Gradual recovery continued in August

October 15, 2020

Non-natural resource sectors supported the recovery in monthly GDP

Non-natural resource sectors supported a further recovery of monthly GDP in August, while natural resource sectors lagged.  The monthly GDP proxy contracted 9.8% year-over-year in August (from -11.7% in July), below our forecast of -8.6% and above market expectations of -10.3% (as per Bloomberg), taking the annual quarterly rate to -13.2% in August (from -20.9% in July). The non-natural resource sectors recovered further (-11.2% in August, from -13.9% in July) driven by construction (-6.5%, from -12.8%), commerce (-8.1%, from -11.5%) and services (-12.7%, from -13.5%), reflecting further easing of distancing measures. In contrast, natural resource sectors deteriorated to -10.1% year-over-year in August (from -4.1% in July), dragged by the volatile fishing output (-6.5% year-over-year in August, from 33.3% in July) and mining -11.2% (from -6.2%).

At the margin economic activity recovered further, but at a slower pace than in July. Using our own seasonally adjusted series, activity continued recovering (1.2% month-over-month in August, from 7.6% in July), taking the quarter-over-quarter non-annualized rate to 23.3% in August (from -3.0% in July). GDP proxy in August is still 12.2% pre-outbreak levels (February).

The data highlights downside risks to our GDP forecast of -11.9% for 2020. We expect the large fiscal stimulus and expansionary monetary policy to support the economic recovery during the rest of the year. However, uncertainty form market unfriendly policies from Congress may curb the recovery.

Julio Ruiz

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