Itaú BBA - ARGENTINA – Activity decelerated again at the beginning of 4Q19

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ARGENTINA – Activity decelerated again at the beginning of 4Q19

Dezembro 23, 2019

We forecast a GDP contraction of 2.9% for this year.

Activity fell in October relative to the same month 2018, but less than expected. The EMAE (official monthly GDP proxy) decreased by 0.9%, beating our expectation of a 2.5% decline and the Bloomberg consensus of a 3.7% decline. On sequential basis, the EMAE rose 1.9% mom/sa in October, offsetting the 2.0% drop in the previous month. Activity rose 0.3% qoq/saar, down from 3.7% in 3Q19. Activity has contracted by 2.3% yoy during the first 10 months of the year.

All sectors dropped at the beginning of 4Q19, with the exception of primary activities. The Agriculture, Mining and Fishing sectors expanded by 2.6% yoy in the quarter ended in October, due to the normalization of the harvest (31.9% in 2Q19). The remaining sectors continued to contract. Construction activity dropped by 6.7% yoy in the quarter ended in October (down from -5.0% in 2Q19); Manufacturing fell by 4.7% (vs. -7.3%); and Services contracted by 2.4% yoy (from -2.9% in 2Q19), on lower real wages following the acceleration of inflation and the sharp ARS depreciation in August.

All sectors also posted a sequential deceleration at the margin. According to our seasonal adjustment, primary activities fell 7.9% qoq/saar in October (+0.3% in 2Q19). Manufacturing output decreased 7.6% qoq/saar in October (-2.0% in June). The Construction sector posted a decline of 14.1% qoq/saar, following a 4.8% decrease in the quarter ended in June. Finally, the Service sector fell by 3.8%, after sliding 1.9% qoq/saar in 2Q19.

We forecast a GDP contraction of 2.9% for this year. Activity likely deteriorated further following the elections in October, with the implementation of tighter capital controls and on-going uncertainty over debt restructuring and policy direction.


Juan Carlos Barboza
Diego Ciongo



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