Itaú BBA - Manufacturing and construction activity plummeted in Argentina

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Manufacturing and construction activity plummeted in Argentina

Junho 5, 2020

The figures were strongly affected by the pandemic

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Manufacturing fell by 18.4% mom/sa in April, following a 17.2% drop in the previous month. On a year-over-year basis, activity dropped by 33.6% in April, leading to a 17.6% yoy contraction in the quarter ended in that month. All sub-sectors showed declines compared to the same month of 2019, led by vehicles (-88.5% yoy), clothing and shoes (-79.1% yoy) and basic metals (-70.7%). According to the survey conducted by INDEC, two-thirds of companies did not operate fully or even partially in April. Meanwhile, construction activity plummeted by 51.6% mom/sa in April, following a 37.9% drop in March. The index tumbled 75.5% yoy in the fourth month of the year and by 48.6% in the quarter ended in April. Employment in the sector contracted in March (-23.4% yoy, as the figures have a one-month lag), amid the beginning of the lockdown. According to a qualitative survey, 62% of the companies involved in public works expect activity to decrease during the period May-July, compared with 77% for companies involved in private works.

Day Ahead: The central bank will release its monthly expectations survey during the day. In the previous survey, analysts rose their inflation forecast for 2020 to 44.4% (median value) from 40%, while the forecast for 2021 increased to 40% from 33% before. Also in the previous survey, pundits reduced their GDP growth forecasts for 2020 to -7.0% from -4.3% before.


The National Institute of Statistics (INE) reported nominal wage growth moderated to 2.6% yoy in April (4.7% in March), the lowest print since 2010. Meanwhile, real wages dropped 0.8% yoy, the first contraction since the global financial crisis. In the rolling quarter ended in April, nominal wage growth was 3.9% (4.6% in 1Q20), while real wages moderated to 0.2% (from 0.9% in March and 1.5% in 4Q19). Slowing wage growth amid the labor market loosening (April saw the first net job loss over 12 months in more than a decade), led to a retreat of the wage bill. Considering only formal employment, the real wage bill dropped 2.4% yoy in April, (+3.7% in 1Q20), while the fall was even deeper if we consider total employment growth. As social distancing measures endure well into the second quarter, a further deterioration of the labor market is expected. This, alongside falling inflation would keep wage growth depressed going forward.

Day Ahead: The institute of statistics (INE) releases inflation for May at 9:00 AM (SP time). Consumer prices were flat (0.0%) from March to April, leading to headline inflation ticking down 0.3pp to 3.4% yoy, as weaker demand and low oil prices counter FX weakening pressures. For May, we expect consumer prices to be flat from April (+0.6% last year), taking annual inflation down to 2.8%.


COVID-19 update: the latest official information from the Ministry of Health is that Brazil has 614,941 confirmed cases (up by 30,925 vs 28,633 from the day before), with 34,021 confirmed deaths (up 1473 compared to the 1,349 increase in the day before), which implies a 5.5% mortality rate. There are now 254.963 recovered cases (up by 16,346 vs 14,979). Regarding the ICU occupation, in São Paulo, the rate of beds for COVID-19 patients stands at 62% in the capital (stable), after the sharp increase in the number of beds this week, and 71% in the state (from 72%).

Last night, President Bolsonaro affirmed that the emergency aid for informal workers (coronavoucher) will be extended for two more months. The president didn’t mention the value of the extended benefit, but anticipated that will be less than the BRL 600 currently paid. In the same direction, local news indicate that the Economy Ministry is considering to reduce the value of the aid to BRL 300 for this additional period (which, according to our calculations, would cost BRL 41 bn). This reduction requires a provisional measure, which, despite its immediate effects, will be further discussed – and potentially modified – in Congress.

Itaú Daily Activity Index: Our Daily Activity Index increased by 2.9 p.p. to 76.3 (Monday, June 1st). The 7-day moving average also went up, by 1.6 p.p., to 74.3. The index is up 38% from the bottom seen on March 28th, but still 24% below the beginning of the series, in Mid-March. See our report here.

Day Ahead: Anfavea’s auto production for May will be published at 11:20 (SP time). This is an important coincident indicator for industrial production.


Day Ahead: The Colombian national institute of statistics (DANE) will release the inflation print for May at 9:00 PM (SP time). Annual inflation ticked down in April (to 3.51% yoy, from 3.85% in March), while core inflation slowed fast at the margin as domestic demand weakened amid the nationwide lockdown. We expect CPI of 0.09% MoM (0.31% last year), pulled down by apparel, fuels and VAT-reduced mobile plans, taking annual inflation down to 3.26%.

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