Itaú BBA - ARGENTINA – Signs of output stabilization

Macro Latam

< Voltar

ARGENTINA – Signs of output stabilization

Março 28, 2019

In year-over-year terms, activity fell by 5.7%, slightly better than the market consensus expectations

Activity rose on sequential basis at the beginning the year. The EMAE (official monthly GDP proxy) expanded by 0.6% mom/sa in January (following a 1.0% gain in December), taking the quarter-over-quarter contraction to 4.6% annualized (from -4.7% in 4Q18). In year-over-year terms, activity fell by 5.7%, slightly better than the market consensus expectations of a 6.0% yoy decline, according to Bloomberg.
 

Our seasonal adjustment indicates that most of sectors posted a month-over-month. Primary activities (agriculture, fishing and mining) increased by 1.1% mom in January, leading to a 0.9% QoQ expansion (annualized), while Construction rose by 4.1% mom but fell 19.1% QoQ annualized (from -20.3% QoQ in 4Q18). Services grew 0.1% mom, but dropped 4.3% QoQ annualized (vs. -5.9% in 4Q18). Finally, manufacturing increased by 5.0% mom, leading to a 15.2% drop in quarter ending in January (vs. -17.1% in 4Q18).

The contraction of most sectors deepened on a year-over-year basis, with the exception of primary activity output, whose expansion was helped by a good harvest. The primary sector grew 2.4% yoy in the quarter ending in January, helped by the normalization of the harvest after the severe drought that affected the sector in 2018. Manufacturing fell by 12.8% yoy in the quarter ending in January, worsening from the 11.9% drop registered in 4Q18, with a weak performance across subsectors. Construction declined by 10.5% (vs. -9.5% in 4Q18), while services contracted by 4.3% yoy (from -3.8% yoy in the last quarter of 2018), likely affected by the decline in real wages and high interest rates. 

We forecast a contraction of 1.2% in 2019. The recent performance suggests a stabilization of the economy. However, expected weaker internal demand, due to high interest rates and a large negative statically carryover, amid a sharp reduction in fiscal deficit will likely curb the long-awaited sequential recovery of the economy until 2Q19 (when the soy harvest will kick in). 

 

Juan Carlos Barboza
Diego Ciongo



< Voltar