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Activity momentum remained weak.
17/07/2023 | Julio Ruiz

The monthly GDP proxy fell by 1.4% yoy in May (down from +0.3% in April), below our 0.1% forecast and market expectations of 0.5% (as per Bloomberg). Activity in May was dragged by agriculture production (-6.2% yoy), likely associated to harsh weather conditions (el Niño phenomenon), volatile fishing output (-70.6%) and a weak construction sector (-11.0%). Mining output expanded at a solid pace (16.7%), while services registered a soft expansion of 1.1%. The quarterly annual rate of monthly GDP fell by 0.3% in May (from -0.4% in 1Q23), with primary and non-primary activity at 3.6% (from 4.7%) and -1.2% (from -1.7%), respectively. 


At the margin, activity deteriorated further in May. Using official seasonally adjusted series, the monthly GDP fell by 1.3% MoM/SA in May, taking the quarter over quarter (non-annualized) growth rate to a weak -0.1% in May (from -0.8% in 1Q23).



Our 2023 GDP growth forecast of 1.4% has a downward bias given recent downside surprises in activity. The large downside surprise in May comes on the back of weaker-than-expected activity print in April, in which the monthly GDP proxy expanded by 0.3% YoY, significantly below market expectations of 1.7%. The second consecutive negative monthly activity surprise suggests the “El Niño” phenomenon may generate more persistent headwinds to activity for the remainder of the year amid a tight monetary policy stance.