|
Downturn in economic activity moderating
further
The economic depression is beginning to ease, as signs of a tentative
recovery emerged in the third quarter. According to the National
Statistical Institute (INDEC), industrial production was down 4.6% in
September over the same month last year, which was up from the 7.6%
contraction seen in August and confirmed the deceleration trend of the
annual contractions observed since June of this year. A strong growth
spurt in textile production (+16.4% year-on-year), healthy growth in
basic metal industry output (+9.0% yoy) and a recovery in paper and
cardboard production (+8.9%), drove the September improvement in
industry. On the downside, activity in the non-metal mineral and
chemical products industries declined, partially offsetting improvements
in other sectors. Similarly, even though the construction sector remains
in a deep recession, recent data releases indicate that the construction
industry’s slump is showing signs of moderating. According to INDEC, the
decline in construction activity eased from 26.7% in August yoy to 21.3%
in September. Finally, annualised supermarket sales continued to exhibit
improvements in September, growing 2.7% over the same period last year.
The September reading was up from the 0.5% yoy growth observed in
August. The Universidad Torcuato di Tella's (UTDT) consumer confidence
index (ICC) experienced a strong upward surge in October, rising 28.2%
over September, when the index had dropped 7.9%. The sub-index for Great
Buenos Aires, which accounts for the greatest weight in the ICC, showed
that both confidence in the economy and consumer confidence for the
coming 12-months registered increases of 56.1% and 28.3% respectively
over September.
Poverty lingering heavy over economic rebound
The persistence of the current private consumption rebound remains
uncertain as poverty is likely to continue to grow this year. Poverty
has worsened substantially since the country entered the current
four-year recession cycle. According to the latest data from INDEC, the
number of household living in poverty has almost doubled in the
timeframe from October 1999 (18.9%) to May 2002 (37.7%). The development
is even worse for the poorest income spheres. Extreme poverty, defined
as those households unable to fulfil basic food requirements, has almost
quadrupled over the same period to reach 16.0% of the Argentine
population. This situation is unlikely to improve in the near future. On
the contrary, poverty levels should continue to rise, as companies
continue to slash jobs. Unemployment, already at 22.0% in May, is likely
to rise slightly to 22.6% by the end of this year with an according
increase in poverty. Once the economic recovery kicks in more notably,
poverty should begin to drop at the rate as unemployment abates.
Participants anticipate the recession to have moderated in the third
quarter. However, the contraction in the economy is likely to have
remained pronounced albeit at a more moderate level, with activity
expected to have dropped by 12.2%. The anticipated decline in GDP of the
final quarter of the year will bring the annual contraction to
double-digit levels. This month’s 2002 annual figure was again revised
upward, by 0.3 percentage points, over last month – the second
consecutive upward adjustment this year. Forecasts for next year reflect
a lingering uncertainty about political and economic conditions. As a
result, panellists’ projections display large divergence, as the GDP
growth forecast for 2003 currently varies largely. The Consensus GDP to
expand very moderately.
|
