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Economic activity in May expands
in line with expectations
In May, the Peruvian economy expanded by 4.3% compared to the same month
last year. The increase was in line with expectations and represents a
slowdown from strong 7.5% growth recorded in April. However, April numbers
were inflated by seasonal factors since April this year counted more
working days than last year, when Easter fell in the fourth month of the
year. Nevertheless, even by seasonal adjusted data the May reading
represents a slowdown from April. According to the National Statistical
Institute (INEI) the economy actually contracted 0.1% over the preceding
month, whereas it expanded by 2.1% in April.
Mining
leads growth but comparison base effect soon to pass
As in previous months, economic growth was driven by mining, which is
still profiting from a favourable comparison with the same month last year
when one of the country’s largest mining facilities, the Antamina copper-zinc
mine, was not yet operating. In May, activity in the sector increased
14.0% over the same period last year. However, the reading represents a
considerable slowdown when compared to the growth rates recorded in the
previous months, which were hovering around the 20% mark. The slowdown is
due to a drop in zinc output where growth in May came in at less than half
the rate observed in the first four months. Lead output also dropped in
May. According to INEI, a standstill in operations at the Cerro de Pasco
mine accounted for the lower lead and zinc output. As we have mentioned
earlier, the favourable comparison effect should begin to subside as early
as July, when the production at the Antamina mine began to be ramped up to
full production levels last year.
Manufacturing sluggish despite a rebound in fishing
The manufacturing industry added 1.2%, a sharp slowdown from the 8.6%
growth recorded in April and also below the average growth rate recorded
in the first four past months of the year. The slump is due to lower
output of non-primary manufacturing, in particular to a massive drop in
capital goods production in May (-58.7% year-on-year). Primary
manufacturing, which accounts for less than a quarter of total
manufacturing, contracted 3.5%. This development actually represents an
improvement when compared to the steep declines observed earlier and
follows on a recovery in the fishing sector, which recorded positive
growth for the first time in half a year, as the government lifted a ban
on anchovy fishing. The construction industry, on the other hand,
experienced a slowdown from the average 10% growth observed in the first
four months of the year. However, the sector still expanded 3.8% over the
same month last year, confirming that the recession in that sector has
finally been left behind. Finally, wholesale and retail activities
improved compared to the performance of the first four months of year,
expanding 4.3% over May 2001. The improvement was due to higher sales of
agricultural products, mining and domestically manufactured goods, as
imported goods sales actually dropped.
Outlook
reduced amid political tensions
Panellists have lowered their GDP growth forecast for this year a notch
since last month. In addition, the panel reduced the outlook for 2003 by
0.3 percentage points. These downward revisions reflect the political
calamities of the Toledo administration and increased uncertainty over the
continuation of the privatisation programme rather than any adverse
current economic developments.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Peru. For more details please click here.
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