Itaú BBA - PERU – Weak economic activity in April

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PERU – Weak economic activity in April

junio 17, 2019

Economic activity in April was dragged mainly by fishing output

Economic activity in April was below market expectations. The monthly GDP proxy posted a null growth in April (from 3.2% in March), close to our forecast of 0.1% and below market expectations of 1.0% (as per Bloomberg), taking the three month moving average in the quarter ended in April to 1.7% (from 2.3% in March).

Economic activity in April was dragged mainly by fishing output, while construction sector improved. Non-natural resource sectors, which account for three quarters of the economy, decelerated to 2.4% year-over-year in April (from 3.6% in March), taking the three month moving average (3MMA) to 2.9% (from 3.3% in March). Looking at the breakdown, construction output recovered to 5.1% in the quarter ended in April (from 1.8% in March), associated to an improvement in public investment execution, while non-primary manufacturing decelerated (0.7%, from 3.1%). Meanwhile, commerce sector (2.6% 3MMA year-over year in the quarter ended in April, from 2.4% in March) improved somewhat, while services (3.8%, from 4.0%) sector decelerated. In turn, natural resource sectors contracted 8.3% year-over-year in April (from 1.7% in March), taking the three month moving average to -2.7% (from -1.3% in March). Natural resource sector was dragged mainly by fishing output (-40.2% 3MMA year-over-year, from -20.5% in March) as last year’s first fishing season started in April, while this year it started in May, which in turn affected also primary manufacturing (-17.1%, from -12.9%). Moreover, mining production contracted 1.1% (from -0.6%). 

At the margin, monthly GDP momentum remained weak. Using Peru’s statistics institute seasonally adjusted series, the GDP quarter-over-quarter annualized growth rate stood at -0.9% (from -2.5% in March).

We expect GDP growth of 3.1% for 2019, reflecting slower global growth following the intensification of trade wars. Although a growth rebound in 2Q19 is likely, as public investment execution recovers, the deterioration of the global economic outlook will likely weigh on Peru’s small and open economy. 
 

Julio Ruiz



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