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Industrial
production weakens in November. Industrial production
lost steam right after registering more healthy growth rates in October,
which had promised brighter prospects for the remainder of 2000.
According to the National Statistical Institute (INE), November industrial
production contracted 0.8% compared to the same month in 1999. INE
claims that the dismal November reading was the result of a higher
comparison base in November 1999, when year-2000 related spending boosted
industrial production. However, November 1999 also marked the end of
a recession and higher growth rates persisted thereafter. As a
consequence, a repeat of last year, when industrial production growth
rates between January and November expanded by 5.0% compared to the same
period in 1999, will become ever more difficult. In December,
industrial production data should come in weaker since business worked
three days less compared to December 1999. Nevertheless, panellists
have maintained their forecasts for 2000 and 2001.
November
unemployment drops. In the moving quarter up to November
2000, unemployment dropped to 9.4% from 10.0% the month before.
Compared to the same period in 1999, unemployment also dropped by 0.6
percentage points. While the observed decline in unemployment was
hailed by the government as auspicious, a closer look does not corroborate
the government’s optimism. First, the drop was in part due to
seasonal factors as commerce prepared for the holiday season.
Second, the number of the employed actually fell by 1.2% over the same
period in 1999 as municipal employment programs expired. Thus, the
drop in the number of unemployed over the same period in 1999 was actually
only 0.4 percentage points. Furthermore, November supermarket sales
advanced 8.2% in real terms over November 1999 but registered a decline of
3.2% over the previous month, indicating that domestic demand is weaker
than expected by most analysts.
The
disappointing data releases in November economic activity do not bode well
for continued strong growth in the fourth quarter, despite healthy growth
in October. In October, the monthly indicator for economic activity
(IMACEC) increased by 5.8% compared to the same month last year.
This was well above the 3.9% annual growth registered in September, when
GDP expansion showed a dimple owing to three working days less than in
September 1999. According to seasonally adjusted data, GDP expanded
by only 0.3% in October compared to 1.0% growth the month before.
Panellists believe economic growth to have receded somewhat from the
growth registered in the third quarter last year compared to the fourth
quarter of 2000. However, for the first quarter 2001, the panel
maintains a more optimistic forecast.
December
inflation in check. In December, consumer prices were up
0.11%, the lowest monthly increase registered in 2000. The subdued
increase in consumer prices was prompted by declining food and clothing
prices, which were offset by higher prices in housing and health. As
a consequence of the relative price stability exhibited in December, the
annual inflation rate dropped for the first time this year, marking 4.5%
in December down from 4.7% in November, precisely in line with the
Consensus and the latest Central Bank inflation target of 4.6% for the
fourth quarter. The favourable December reading was also supported
by a drop in fuel prices (-0.5% over November 2000). Underlying
inflation, which excludes fuels and fresh fruits, increased by 0.4% in
December, taking the annual rate to 3.4% from 3.3% registered in November,
just below the Central Bank’s target of 3.5% for the last quarter in
2000. For 2001, panellists expect inflation to moderate further
assisted by declining oil prices. The Consensus figure is above the
Central Bank’s objective to reduce inflation to 3.4% by the third
quarter 2001. The Central Bank’s 2002 target of 2.8% (IPC;
Underlying inflation: 3.1%) is also perceived as too ambitious by
panellists.
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