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Economic
growth accelerates in July – trend remains unchanged
In July, the economy expanded by 3.8% compared to the same month in 2003.
The reading constituted an acceleration compared to the 3.0% growth
observed in the previous month, which had represented the weakest showing
since December last year. Monthly data corroborate the acceleration
registered by the year-on-year comparison. According to seasonally
adjusted data the economy expanded by 0.36% over the previous month.
The July reading consolidates the growth trend at the lower end of the
3.4% to 3.8% growth rate range, which prevailed in the first seven months
of the year.
Mining
continues to propel growth amid higher copper and gold output
The economic developments in July were dominated by two factors, which
have characterised the past three months: a slump in mining and a surge in
fishing. In July, mining and fuels contracted by 1.9% over the same
month last year, the third consecutive month of declining activity.
Over the past three years, mining had constituted the cornerstone of
economic growth and in the first four months of this year, the sector had
expanded by 12.0% over the same period last year. The slump observed
in July was mainly due to a decline in gold, zinc and iron output.
Production levels in zinc and gold declined amid lower concentration of
the metal in the extracted ore. Iron output, which is less important
than gold and zinc, was virtually halved compared to last year’s level,
as activity from the only iron producer, Shougang Hierro Perú, ground to
a halt. Copper, in contrast, expanded 31.5% over July 2003.
The copper sector has benefited from massive growth at Antamina, the
country’s second largest copper mine, and the ramp up of mining
operations at the BHP Billiton Tintaya mine. After activity resumed
in October 2003, the mine is now the third largest copper mine after
Southern Perú Cooper Corporation and Antamina, which have a market share
of 46.5% and 39.0% respectively.
Buoyant
fishing leads primary manufacturing to strong growth
In contrast to the dismal developments of mining, fishing thrived.
In July, the fishing sector expanded by 58.8%, following on 28.5% growth
registered in June. The July reading was the strongest growth
registered since November 2002 and represented the seventh consecutive
month of strong activity, the last five in the double-digit range.
Typically, the erratic shifts in activity of the fishing sector, following
on sudden climatic changes and government-induced fishing bans, account
for the lion share of the volatile developments in the economy, as a large
part of the country’s manufacturing activity depends on fishing as a
input. This year’s seven month patch of positive growth rates in
fishing comes on the back of many government-imposed bans on the catch of
anchovies during the same period last year. This year, the
government has imposed less bans owing to more favourable climatic
conditions. In July, climatic conditions enabled a tripling over
last year’s catch of anchovies, which account for almost half of total
fishing output. The favourable developments in the first seven
months of the year are likely to help lift fishing activity overall this
year. The National Fishing Association estimates that Peru will
produce about 6.8 million tons of fish products this year compared with
5.9 million tons in 2003. Furthermore, the Central Bank estimates
that annual fish product exports will exceed US$ 1 billion this year.
Manufacturing
accelerates strongly amid strong input from fishing sector
Primary manufacturing, which depends to a large extent on fishing as a key
input, also profited from the sustained recovery in the fishing industry.
In July, manufacturing based on raw materials rose 17.8% over July 2003,
following on 16.2% growth in June. The July reading represented the
fastest growth pace in primary manufacturing observed in almost two years.
The strong recovery came in spite of a 2.3% contraction in agriculture and
livestock (June: -6.9% year-on-year), which, next to mining, constituted
the only sector in negative territory in July. Agriculture
contracted as a consequence of lack of rain in the mountain zones and
unusually cold weather in the south. Growth of non-primary
manufacturing also accelerated, from 5.0% in June to 6.6% in July.
The resilience observed in the manufacturing sector was particularly
pronounced in capital goods, which expanded by 72.4% annually in July but
account only for a small part of total industrial manufacturing.
While consumer goods expanded a strong 7.5%, intermediate goods output
registered the slowest growth rate with a 3.6% expansion over July 2003.
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