Itaú BBA - PERU – Weak economic activity in November

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PERU – Weak economic activity in November

Janeiro 15, 2020

Economic activity was dragged mainly by a sharp contraction in construction output

Monthly GDP surprised to the downside in November. The monthly GDP proxy grew 1.9% year-over year in November (from 2.1% in October), below our forecast of 2.4% and market expectations (as per Bloomberg), taking the quarterly growth rate to 2.1% in November (from 2.6% in October). 

Economic activity was dragged mainly by a sharp contraction in construction output. Non-natural resources sector decelerated to 1.6% year-over-year in November (from 2.0% in October), taking the quarterly annual growth rate to 2.3% (from 2.8%). The figure was dragged mainly by a sharp contraction in construction output (3.7% year-over-year in November, from +1.2% in October), consistent with a weak public capital expenditure execution. Annual real growth rate in local and regional government capital expenditure in November were -35.5% and -0.6%, respectively, while at the national level it expanded 0.9%. In turn, services (4.0% year-over-year in November, from 3.7% in October) and commerce (3.5%, practically unchanged from October) sectors remained resilient, while non-primary manufacturing kept contracting (-2.7% year-over-year in November, from -3.6% in October). In turn, natural resource sectors decelerated to 2.0% year-over-year in November (from 2.4% in October), taking the quarterly growth rate to 0.9% in November (from 1.6% in October). Looking at the breakdown, fishing output contracted 13.8% year-over-year in November (from -0.7% in October), affecting in turn primary manufacturing (-2.3%, from 7.0%). On the other hand,  mining output recovered to  4.0% (from 0.7%).

At the margin, GDP momentum remained weak. Using Peru’s statistics institute seasonally adjusted series, the GDP quarter-over-quarter annualized growth rate decelerated to 2.2% in November (from 3.3% in October). 

We now expect GDP growth for 2019 at 2.2% (from 2.3%). A growth improvement next year is likely, amid lower tensions between China and the U.S. and more supportive fiscal and monetary policies.  


Julio Ruiz


 



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