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Sequential contractions in mining would add downside risks

Activity indicators were mostly weak in March, with mining posting a significant sequential fall, while retail sales fell mildly from February and manufacturing registering a modest 0.3% mom/sa increase. Manufacturing fell 5.5% YoY in March (3.6% down in February; dragged by chemical production), greater than the Bloomberg market consensus and our -5% forecast. Mining also fell by 8.7% YoY, with a significant sequential contraction of 5.2% MoM/SA, building on the 1.1% MoM/SA decline in February, as low ore grades and operational problems restrict activity. As a result, industrial production (grouping manufacturing, mining and utilities) fell 1.8% MoM/SA, and 5.9% YoY (1.1% fall in February). Retail sales (including vehicles) fell 0.2% MoM/SA, contracting sequentially for the third consecutive month. In annual terms, retail sales dropped 8.4% YoY (somewhat milder than the Bloomberg market consensus of -9.2% and our 9.3% call). Overall, the monthly GDP proxy will likely post an annual contraction of 1.6% YoY (May 02 release; 0.5% YoY fall in February).

Most activity indicators contracted during the first quarter of the year. Durable retail sales fell 6.3% YoY (10.1% decline in 4Q22), while non-durables dropped 10.3% YoY (13.6% fall in 4Q22). Total retail sales ended the first quarter with a 9.3% drop (12.8% down in 4Q22; -12.9% in 3Q22). Industrial production fell 2.3% YoY (3.5% fall in 4Q22), with manufacturing (3.5% YoY down; -7.1% in 4Q) and mining (1.7% YoY decline; -0.3% in 4Q) both falling.


Retail activity continued to fall sequentially in 1Q23. Manufacturing increased 9% qoq/saar, partly offsetting the 11.5% decline in 4Q, but a mining fall of similar magnitude in the quarter led to broadly flat industrial production at the margin in 1Q23. On the other hand, retail sales contracted 5.3% qoq/saar, building on the 10.4% decline in 4Q22, and the sixth consecutive quarterly fall.


The large annual contractions in March activity data confirm the economy continues to adjust, while important sequential contractions in mining add downside risks to our short-term headline activity forecast. We expect a GDP contraction of 0.4% this year (2.4% last year).


Andrés Pérez M.

Vittorio Peretti 

Ignacio Martinez Labra