Growth led by industry.  According to the National Statistical Office (INDEC) industrial production is recovering strongly.  The INDEC July data shows that industrial activity expanded a healthy 6.6% year-over-year on a seasonally adjusted basis.  This is the second strongest performance since March 1998 and up substantially from zero growth registered in June.  The basic metals and chemical industry were the key drivers behind the strong industrial performance, experiencing 19.4% and 12.5% expansions respectively.  Within the basic metals industry, aluminium did well, propelled by new production capacity and strong demand in international markets.  Within the chemicals industry, agrochemical production experienced the strongest growth.  In general, industry has benefited from a favourable export environment generated by higher demand, particularly from neighbouring Brazil.  According to INDEC, exports were up 13.6% in June over the same period in 1999.

However, data from the independent Foundation for Latin American Economic Research (FIEL, Fundación de Investigaciones Económicas Latinoamericanas) contrasts sharply with the government release.  According to FIEL, seasonally adjusted industrial production grew by a significantly more modest 3.1% over the same month last year.  The FIEL data would be more in line with the moderated pickup in industry signalled in INDEC releases for most of this year.  The government claims that the discrepancy arises from the exclusion of the agrochemical sector in FIEL’s industry survey, one of the strongest growth sectors in July.  Even so, the Argentine industry is unlikely to sustain the July performance throughout the year.  In fact, most of the businesses surveyed in INDEC's July industrial report still lack confidence in the economic rebound.  Nearly 75.0% of the surveyed businesses claimed that they expected domestic demand to remain at current levels, compared to 12.2% who anticipate a pick up and another 14.6% who expect a downturn.  Similarly, some 62.8% of the companies do not expect further growth in exports, compared to 28.2% that anticipate an upturn and 9.0% that foresee a decline. 

Consumption Sluggish.  Consumption data shows that domestic demand is unlikely to rebound strongly this year.  In June, supermarket sales dropped 1.4% over the same month in 1999 and the annual average continues to linger in negative territory, now for the 14th consecutive month.  Despite a brief seasonal spike over the winter holidays, consumer confidence about the economic prospects for this year remains low and is likely to put further downward pressure on consumption.  The University Torcuato di Tella's (UTDT) August consumer confidence index (ICC) showed a continued slump in consumer confidence.  Both confidence in the economy and consumer confidence for this year dropped by 7.4% and 1.4% respectively over July.  Nevertheless, UTDT’s index of leading economic indicators shows that economic activity experienced a push in July with growth reaching 2.8% over the same month last year.

Continue >>