The monthly GDP (IGAE) increased 4.3% yoy in May (from 2.7% in April), above our forecast and market consensus, as per Bloomberg survey (3.8% and 3.5%, respectively). Looking at the breakdown, the quarterly annual rate of industrial output rose to 2.1% in May (from 1.8% in the previous month), while activity in the service sector grew 3.8% (from 3.5%), supported by a resilient labor market. The construction sector rebounded by 2.9% yoy in the quarter ended in May, up from 0.6% in April.
Sequentially, monthly GDP remained flat in May, after edging up 0.9% mom/sa in April. Thus, activity decelerated at the margin, with the quarter-over-quarter seasonally adjusted annualized growth rate (qoq/saar) of the monthly GDP at 3.0% in May (from 3.9% in April). The sectors posted mixed signals in the month. The service sector has been the main contributor for monthly activity, with the qoq/saar at 4.2% in May (from 5.6% in April), followed by the rebound of construction output (up by 4.2% from -4.3% in April), partially offset by softer manufacturing (0.0% from 1.4%).
Our 2023 GDP growth forecast stands at 2.7%. We expect a deceleration in activity in 2H23 due to an expected slowdown in the U.S. and the effects of a tight monetary policy stance.