Itaú BBA - ARGENTINA – New drop in activity in February

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ARGENTINA – New drop in activity in February

Abril 28, 2020

Coincident indicators point to a sharp contraction in March.

Activity continued to fall in February, even before feeling the impact of the COVID-19 outbreak. The EMAE (official monthly GDP proxy) fell by 2.2% yoy, a lower contraction than expected in the Bloomberg market consensus (-4.0%) but higher than our call of -1.5%. On a sequential basis, the index decreased by 1.1% mom (from an upwardly revised +0.2% in January), taking the quarter-over-quarter contraction to an annualized figure of 2.2% (from -4.4% in the quarter ended in January).

Activity declined at a slower pace across all sectors, except Construction. Construction continued to lead the downturn, dropping 14.6% in the quarter ended in February, from -10.1% in January. Agriculture, Mining and Fishing retreated by 1.1% yoy in the 3MMA as of February, from -1.2% in January. Manufacturing fell by 0.6% in the period (from -1.9% in the quarter ended in January) and Services contracted by 0.5% yoy (similar to the January drop). 

Some sectors posted a recovery in February, according to our seasonal adjustment. Manufacturing output gained 7.8% qoq/saar in February (from -2.2% in January), while the Service sector grew by 1.0% (following +1.7% qoq/saar growth in the previous month). On the other hand, the Construction sector plummeted by 26.3% qoq/saar in February, following a 26.6% decrease in January. Primary activities fell by 3.4% qoq/saar in February, from -11.6% in the previous month. 

Coincident indicators point to a sharp contraction in March. GDP proxy estimates from OJF consulting contracted by a hefty 9.5% yoy, affected by the beginning of lockdowns. We expect a severe contraction in 1H20 due to the negative effects of measures to control the outbreak of COVID-19, followed by some output normalization in the second half of the year. As a result, we forecast a GDP contraction of 6.4% for 2020. 

Juan Carlos Barboza
Diego Ciongo



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