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Robust
growth trajectory persists as domestic demand picks up
In November, the economy grew 8.7% over the same month in 2002,
according to the monthly indicator for economic activity (IMAE, Estimador
Mensual de Actividad Económica) – below the strong 10.3% growth
rate observed in the previous month. In seasonally adjusted terms,
economic activity was up 0.6% over October, which was also below the
0.8% increase observed the prior month.
Private
consumption picking up amid favourable economic setting
More recent data suggest that while the Argentine economy continues
to grow at robust rates, the growth momentum is gradually receding to
more moderate levels. According to the National Statistical
Institute (INDEC),
real supermarket sales grew 4.4% in November over the same month in the
prior year. The November growth figure represented the fifth
consecutive monthly expansion but was well below the 7.5% expansion
observed in October. Automobile sales, on the other hand, more
than doubled in December over the same month in 2002, following on 12.0%
growth in November. The year-end growth figure brought annual
automobile sales up 21.2% over the prior year’s level.
Furthermore, additional indicators show that consumers remain confident
about prospects this year. In January, the University Torcuato di
Tella's (UTDT)
consumer confidence index (ICC) for the capital of Buenos Aires rose
13.3% over the previous month - the highest increase observed since the
introduction of the indicator in 1998. Of the surveyed
participants, 59.8% anticipate that the economic situation will improve
this year, which is up from 46.8% in December. In addition to the
favourable effect of the strengthening exchange rate on real incomes,
declining unemployment and increased credit availability is providing a
push to the current rebound in private consumption.
Investment
growth up while domestic and external demand rebound
The
robust export expansion observed throughout last year continued into
December, when exports increased 21.6% over their levels for the same
month in the previous year. The December export growth figure was
above the already strong 12.0% expansion observed in the prior month.
Prospects for further recovery in the global economy have prompted
exporters to step up their investment activities, particularly as credit
availability is improving. Capital goods imports rose 221.1% in
December, which was up from a 159.9% growth rate in the prior month.
As a result, annual capital goods imports were up a staggering 89.9% for
2003. However, this impressive growth rates were achieved on the
back of a very weak comparison base. In 2002, capital goods
imports had dropped 68.5% over 2001 and in absolute terms the level of
capital goods imports in 2003 still remained 40.2% below the level
observed in 2001. The construction sector also points towards
strong investment activity. According to INDEC,
the construction activity index (ISAC)
rose 30.8% in December over the same month the prior year, which was
down moderately from the 38.7% expansion the previous month.
Within the construction industry, virtually all sub-sectors registered
double digit growth rates, with non-housing construction and
infrastructure projects leading the way. The only sub-sector to
experience a decline was oil-related construction, where output dropped
13.0% over the same month the prior year.
Growth
outlook favourable as economic expansion remains broad-based
On
1 February, the government announced that it has revised the growth
estimate for this year upward to 6.0% from the original 4.0% projection
included in the 2004 Budget assumptions, anticipating strong investment
growth of 16.0%. The government’s forecast is now in line with
the Central Bank’s estimate announced on 22 January. Consensus
Forecast participants are not as optimistic as the government about the
expansion in economic activity this year and anticipate the gross
domestic product (GDP) to grow at a lesser 5.5% pace. This
month’s growth forecast for 2004 is up 0.4 percentage points from last
month and confirms the trend for increased optimism about the economy
since the growth estimate was revised upward for the fifth consecutive
month. However, the economic expansion will moderate towards the
end of this year and will decelerate further in 2005, when GDP is seen
as expanding 3.8%. |
