Itaú BBA - ARGENTINA – Activity continued to improve in May

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ARGENTINA – Activity continued to improve in May

julio 25, 2019

The negative impact of the severe drought in 2018 is in the past.

Activity showed a new sequential gain in May. The EMAE (official monthly GDP proxy) posted an increase from April of 0.2% mom/sa and 2.6% yoy, after a year of negative year-over-year readings, beating both the Bloomberg market consensus (0.3% yoy) and our expectations (-0.8% yoy); quarter-over-quarter growth remains in negative territory, at 1.8% annualized. 

The negative impact of the severe drought in 2018 is in the past. Normalization of the soy harvest drove the agriculture, mining and fishing sectors up by 27.5% yoy in the quarter ended in May (from 4.6% in 1Q19). The rest of sectors continued to contract. Manufacturing fell by 9.4% in the period, compared with a drop of 10.8% in 1Q19. Construction declined by 5.2% yoy (from -6.8% in 1Q19), while services contracted by 4.2% yoy (from -4.0% in the quarter ended in March), still affected by the decline in the real income of households and high interest rates. 

Our seasonal adjustment shows mixed performance at the margin. Primary activities climbed by 14.4% qoq/saar, similar to the 11.5% posted in 1Q19. Construction also grew, by 8.4% qoq/saar, from 8.8% in March. However, Manufacturing fell by 3.1% qoq/saar, after growing 7.0% in 1Q19. The contraction of the Services sector deepened to 5.1% qoq/saar in May, following a 2.0% decline.

We keep our GDP forecasts unchanged at a decline of 1.4% for this year and growth of 2.5% for 2020, assuming that market-friendly policies continue next year and that the government regains access to international capital markets.

Juan Carlos Barboza
Diego Ciongo

 



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