Itaú BBA - PERU – October’s monthly GDP surprised to the upside

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PERU – October’s monthly GDP surprised to the upside

December 15, 2020

Economic activity recovered further

The monthly economic activity index was above market expectations in October. The monthly GDP proxy contracted 3.8% year-over-year in October (from -7.0% in September), compared to our forecast of -4.4% and market expectations of -5.0% (as per Bloomberg), taking the annual quarterly rate to -6.7% in October (from -9.4% in 3Q20). The non-natural resource sectors recovered further (-5.7% in October, from -6.6% in September) driven by construction output (8.8%, from 4.4%) which was supported by an improvement in public capital investment execution, while services and commerce sectors stood at -3.8% (from -6.1%) and -8.7% (from -7.7%), respectively. Likewise, natural resource sectors recovered to -1.5% in October (from -8.4% in September), supported by mining (-2.8%, from -12.2%) and fishing output (12.4%, from 7.3%).



At the margin, economic activity recovered further in October. Using our own seasonally adjusted series, monthly GDP posted a solid monthly growth of 3.0% month-over-month in October (from 2.5% in September), taking the quarter-over-quarter non-annualized rate to 14.7%. We note GDP proxy in October is still 7.3% below pre-outbreak levels (February).



We expect GDP to fall by 12.6% for 2020, recovering 9.6% in 2021. A large fiscal and monetary stimulus will support the recovery. However, a delay in fiscal-policy execution in a new interim administration and the risk of renewed political confrontation are downside risks to the economic recovery. 

Julio Ruiz



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