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Huge
dent in November economic activity
In November, the economy expanded by only 0.9% compared to the same month
2002, the slowest pace in more than two years. The reading was well
below market expectations, which had anticipated that growth would develop
along the 3% to 4% range observed in the prior months. In October,
the economy expanded at the upper end of the range at an annual pace of
4.1%. In part, the low reading is due to a high comparison base in
November 2002, when the economy had expanded at a very robust 6.0%.
However, seasonally adjusted data confirm the slump, as the economy
actually contracted 0.9% over October 2003.
Healthy
primary manufacturing mitigates slump in industries based on raw materials
For once, the usual suspect for sudden changes in the growth pattern is
only partially responsible for the shift. Fishing, which typically
exhibits a very erratic growth pattern, dropped only 0.4% over November
2002. However, this was a sizeable setback from the preceding month,
when the sector had expanded at a double-digit pace. As a result,
primary manufacturing, which depends on fish as an important input,
deteriorated 7.2 percentage points reverting the 4.9% October expansion in
a 2.3% contraction in November. Next to fishing, lower activity in
metals and oil-related primary manufacturing accounted for the slump.
Non-primary manufacturing, on the other hand, improved. In November,
non-primary industries added 1.5% over the same month 2002, up from the
anaemic 0.3% expansion observed in October. The improvement was
mainly due to higher consumer goods output, whereas intermediate goods
developed broadly along the lines recorded in October. Capital goods
output, in contrast, dropped 17.8%, following on the more contained 9.2%
contraction in October. The up tick in non-primary manufacturing
output mitigated the detrimental impact from industries based on raw
materials. As a result, total manufacturing output increased 0.7%
following on 1.2% growth in October.
Construction,
commerce and other services nosedive in November
While fishing and primary manufacturing played a part in the November
slump, these sectors can only explain part of the sizeable downswing,
owing to their relatively low importance for the economy as a whole.
The collapse in economic activity in three key sectors, namely
construction, commerce and other services accounts for the lion share of
the decline. Construction decelerated a full 7.5 percentage points,
as the robust 7.5% growth observed in October dwindled to a virtual
standstill in November (+0.1% year-on-year). Commercial activities
deteriorated less in percentage points but slid into negative territory in
November (- 1.4% yoy) following on 2.7% yoy growth in October.
Finally, the so-called other services, which account for almost 40% of
total economic activity according to the currently used methodology of the
National Statistical Institute (INEI), slowed from 5.9% growth in October
to 0.9% growth in November.
Mining
and electricity continue to show resilient growth
In two other key sectors, mining and electricity and water, activity
remained relatively stable. Mining added 4.5% in November, down
moderately from the 4.7% growth in October. The mining sector
benefited from resilient zinc output, as the Antamina mine almost tripled
its output of the metal over November the year before. The positive
impact from zinc was contrasted by iron mining, where output dropped
following on double-digit growth in October. Electricity, gas and
water improved marginally from 4.8% annual growth in October to 5.0% in
November.
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