The economic adjustment continues as the economy moves to more sustainable levels
Andrés Pérez M. & Vittorio Peretti
02/01/2023
Sectoral activity data came in weak in November with manufacturing, mining and retail sales falling sequentially.Manufacturing fell 0.8% MoM/SA in November, following the 3.9% drop in October, and leading to a 7.8% YoY fall (-9.2% in October), sharper than the Bloomberg market consensus and our call of a 7% drop. Meanwhile, mining fell 4.4% MoM/SA, reverting part of the 6.7% gain in October, resulting in a 3.5% YoY decrease (+0.5% in October). Overall industrial production (grouping manufacturing, mining and utilities) shrunk 5% YoY (-4.3% in October). On the other hand, retails sales (including vehicles) presented a significant 4.8% MoM/SA fall, leading to a 15.2% decline over twelve months, deeper than market expectation of -13% and our 12% call. As a result, our 1.5% YoY contraction call for November monthly GDP monthly proxy (IMACEC) to be released Tuesday faces the risk of a sharper decline.
Retail sales (including vehicles) continue to fall from elevated levels.Durable goods sales fell 13.1% YoY during the quarter ending in November (-14% in 3Q), while non durable goods sales fell 14.4%, deeper 12.8% drop in 3Q. Total retail sales fell 14.1% YoY (13.1% down in 3Q). Meanwhile, industrial production fell 3.7% YoY in the quarter (-3.9% in 3Q), with both manufacturing (-6.9% YoY) and mining (-0.9% YoY) contributing to the negative result.
Activity continues to fall at the margin.Retail sales contracted 17.9% qoq/saar (-19.7% in 3Q), while manufacturing fell 8.8% qoq/saar drop (from -4.7% in 3Q). Total industrial production fell 0.4% qoq/saar (-8.9% in 3Q), boosted by a transitory rebound of mining within the quarter.
The economic adjustment continues as the economy moves to more sustainable levels.We expect growth of 2.7% in 2022 (11.7% last year), but the effects of contractionary monetary and fiscal policies in place, and a milder global impulse would lead to a 1.1% contraction in 2023. Nevertheless, the gradual activity correction underway, mild labor market loosening and still elevated inflationary pressures would lead the central bank to keep rates stable at 11.25% until mid-2023.
Andrés Pérez M.
Vittorio Peretti