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Economic
activity proceeds along healthy path
The
monthly indicator for economic activity (IMAE, Estimador Mensual de
Actividad Económica) rose 9.9% in April over the same month last
year, which was up notably from the 7.2% expansion registered in the
prior month. The April acceleration in economic activity temporarily
halted the monthly decelerations in output observed since November last
year. Furthermore, economic activity grew 0.56% in seasonally
adjusted terms over the prior month, when the IMAE increased 0.56%.
Finally,
the
downward trend in overall economic growth reversed, as the annual
average growth rate rose from 8.3% in March to 8.5% in April.
Industrial production slowing but remains strong
More
recent data confirm that economic growth remains on a solid footing. In
May, industrial production expanded 8.5% over the same month last year.
Despite the strong May reading, the figure was well below the robust
10.4% year-on-year growth registered in April. Growth remained strong
across all sub-sectors of industry with motor vehicle output (+25.3%
year-on-year) and paper/cardboard (+22.6% yoy) production leading the
way. Oil processing and tobacco production were the only sub-sectors to
experience declines in activity with output dropping 3.5% and 2.5%
respectively over the same month last year. Despite the healthy May
industrial production figure, the expansion resumed its moderation
trajectory that had been temporarily halted in April, with the annual
average growth rate dropping from 8.9% in April to 8.7% in May.
Construction boom remains backbone of overall growth
Construction activity remained buoyant into the second quarter of the
year. In April, construction output rose 16.4% over the same month the
previous year, which represented a strong rebound from the 2.3% decline
registered in the prior month. While all sub-sectors in the
construction industry experienced a double-digit expansion, growth was
strongest in oil-related and infrastructure projects, where activity
rose 28.4% and 26.3% in April respectively over the same month last
year. A month-on-month reading confirms the healthy growth observed in
April, as activity jumped 4.9% in seasonally adjusted terms over March.
Consumption moderating as confidence declines
The
strong expansion in private consumption appears to be abating.
According to the National Statistical Institute (INDEC), supermarket
sales rose 4.5% in April over the same month last year. The April
reading was below the prior month’s 5.6% expansion. More recent figures
from the Argentine Confederation of Medium-sized Businesses (CAME,
Confederación Argentina de la Mediana Empresa) show that retail
sales recovered moderately in June from two consecutive monthly
declines, as growth reached 4.3% in June over the same month last year,
contrasting the 1.8% drop registered in May. Furthermore, consumer
confidence has been dented. In June, the University Torcuato di
Tella's
(UTDT) national consumer confidence index (ICC) dropped 1.5% over
the previous month, continuing the declining trend observed throughout
the second quarter.
Investment growth remains strong but slowing
Investment activities seem to have remained healthy in the second
quarter of this year. In May, capital goods imports rose 58.7% over the
same month last year, which was up from already robust 47.6% growth rate
registered in the prior month. As a result of the May reading, annual
capital goods imports were up 61.6% compared to the same period a year
ago. Despite the very strong growth in capital goods, the trend is
pointing to a gradual deceleration from previously unsustainable growth
rates, as the May reading was down from an even higher 64.4% growth rate
in April.
Robust
pace of economic activity to moderate further this year
Economic
activity is anticipated to have decelerated to 6.9% in the second
quarter from the healthy 8.1% growth pace observed in the previous
quarter. Furthermore, gross domestic product (GDP) growth is
anticipated to decelerate further in the second half of this year, with
growth slowing from 5.7% in the third to 5.0% in the final quarter.
Nevertheless, according to Consensus Forecast participants, the strong
first half of this year should help lift the annual growth rate in GDP
to 6.5%, which is unchanged from last month’s estimate. The current
Consensus Forecast reading remains on target with the Central Bank’s
forecast and well ahead of the government’s 5.5% growth forecast.
However, next year, economic activity is anticipated to moderate further
with full year growth expected by Consensus Forecast participants to
reach 4.0%.
Consumer
prices on gradual upward trajectory
In June,
consumer prices rose 0.92%, which was up from the 0.60% increase
observed in the prior month but was below market expectations. A spike
in housing costs and education prices prompted the June increase. As a
result of the June reading, annual inflation rose from 8.6% in May to
9.0%. Despite the likelihood of a slowdown in economic activity and the
continued strengthening in the currency, Consensus Forecast panellists
expect inflation to continue to rise this year. Year-end inflation is
expected to reach 10.2%, which is up 0.3 percentage points from
last month’s forecast. Furthermore, the current Consensus Forecast
figure is well ahead of the Central Bank’s inflation target range of 5%
to 8% underlying this year’s monetary programme but is still within the
government’s forecast of 8% to 11%. Next year, inflation is expected to
drop notably to 8.2%, which is 0.3 percentage points below last month’s
figure.
Current
account surplus reverted
In the
first quarter, the current account balance incurred a deficit of US$ 5
million. The first quarter deficit contrasted the US$ 500 million
surplus registered in the fourth quarter and also remained well below
the US$ 503 million surplus observed in the first quarter last year.
The decrease in the current account surplus over the same period last
year was mainly due to a higher deficit in the income balance and a
moderate deterioration in the trade surplus. The trade surplus dropped
from US$ 2.9 billion in the first quarter last year to US$ 2.7 billion,
as exports grew 13.5% year-on-year compared to 27.3% import growth. The
US$ 543 million capital account surplus was more than sufficient to
cover the current account deficit. In annualized terms, the current
account narrowed to US$ 2.8 billion after reaching US$ 3.4 billion the
previous quarter. Consensus Forecast participants expect the current
account surplus to narrow further to US$ 2.5 billion this year. |
