2026/07/22 | Diego Ciongo & Soledad Castagna
Economic activity contracted on a sequential basis in May. The EMAE (monthly GDP proxy) unexpectedly fell 0.5% MoM/SA, following a 1.5% decline in April. As a result, activity was flat on sequential basis in the rolling quarter ending in May (0.0% QoQ/sa), down from +0.7% in 1Q26. On an annual basis, output rose 0.2% YoY in May, well below the Bloomberg median (2.5%) and our call (2.4%). Nevertheless, annual growth in the quarter ending in May reached 2.6% YoY, above the 2.3% of 1Q26. The statistical carryover for 2026 now stands at 1.0%.
Most sectors expanded in the quarter ending in May, with the exception of manufacturing. Primary activities rose 11.5% YoY (down from +16.1% YoY in 1Q26), supported by a strong agricultural harvest. Construction increased 2.8% YoY, up from 2.6% YoY in 1Q26. Services (including commerce) grew 0.3% YoY, down from 1.1% YoY in 1Q26, reflecting still-subdued domestic demand. In contrast, manufacturing contracted 1.1% YoY, consistent with weak imports of capital goods and intermediate inputs.
Our take: We see downside risks to our 2026 GDP growth forecast of 3.5%, given soft activity in 2Q26 and a low statistical carryover for the year. While the ongoing disinflation process and lower borrowing rates should gradually support real incomes and private consumption, the weakness in manufacturing and domestic demand suggest that the recovery remains uneven. The release of the June EMAE data on August 20 will be an important test of whether activity stabilized at the end of 2Q26 or continued to lose momentum.