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Economic activity continues to expand at
healthy growth rates, as the appreciation in the currency, declining
interest rates and a favourable export setting provide a backdrop for
recovery. However, recent data show that growth rates may be moderating
from earlier highs and that economic growth will slow next year, despite
prospects for a pick up in international demand. |
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Growth surges ahead amid broad-based recovery but slight moderation
emerging
Recent data suggest that the economy continued along a strong growth
trajectory in the third quarter the but that the pace of recovery is
moderating. According to the National Statistical Institute (INDEC), the
monthly indicator for economic activity (IMAE, Estimador Mensual de
Actividad Económica) rose 8.0% in August over the same month last year.
Even though the August showing remained robust, the figure was down from
the 8.7% increase registered in July and reversed the eight month trend
of successive monthly accelerations in economic growth. In seasonally
adjusted terms, economic activity rose 0.1% in August over the previous
month, when the IMAE had increased at a 1.8% pace.
According to the Centre for Financial Research at the Universidad
Torcuato Di Tella (CIF-UTDT), economic activity showed a slight upturn
in September. The CIF-UTDT’s monthly leading indicator of Argentine
economic activity (Índice Líder del Nivel de Actividad de la Economía
Argentina) rose 1.3% in September over the prior month, which
represented an improvement when compared to the 2.1% and 1.1% declines
observed in July and August respectively. Nevertheless, in annual terms
the leading index continued to exhibit a moderating trend observed since
June.
Export sector and investment drive industry
Industrial production rose 14.9% in September over the same month last
year, virtually unchanged from the 15.0% expansion observed the previous
month. Growth remained in double-digit territory in the majority of sub-sectors
with the exception of oil processing, where production dropped 1.8% in
September over the same month last year. However, in seasonally adjusted
terms, industrial output actually declined 1.4% in September over August
– the first monthly drop registered since May.
Construction output remains strong
Construction activity remained very strong, as businesses are benefiting
from lower interest rates and a resurgence of domestic demand.
Construction output was up 44.3% in September over the same month last
year, an improvement compared to the 32.8% annual growth rate observed
in August. In seasonally adjusted terms, construction activity rose 3.4%
in September over the previous month, which was up from the 1.5% drop in
activity registered in August.
Outlook remains favourable but activity to moderate next year
The strong growth experienced in the first half of the year and
continued favourable prospects for healthy growth in the second half of
this year has prompted government officials to revise their forecast for
gross domestic product (GDP) growth this year upward from 5.5%
envisioned earlier to 7.0%. Consensus participants have yet again
revised their forecast for this year upward from 6.0% last month to the
current 6.5%, which is still below the government’s more optimistic
scenario. Despite improved prospects for a global rebound next year, the
export engine will decelerate in 2004 and the current rise in domestic
demand, particularly investment, will moderate. The resulting slowdown
in economic growth will bring down GDP growth to 4.4%, which is up a 0.1
percentage point from last month’s forecast and remains above the
government’s 4.0% estimate included in the 2004 budget proposal.
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