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Economic
activity accelerates
Economic
growth remained robust at the beginning of the year. In February, the
monthly indicator of economic activity (EMAE, Estimador Mensual de
Actividad Económica) increased 9.5% over the same month the previous
year, which was above the 9.1% expansion observed the prior month.
Moreover, a month-on-month comparison confirms the acceleration. In
seasonally adjusted terms, economic activity rose 0.96% in February over
January. As a result of the healthy February reading,
the annual average growth rate in economic activity rose from 9.2% in
January to 9.3%,
maintaining the trend of robust growth at virtually the same pace
registered since May 2005. However, more recent data indicate that
economic activity is likely to have decelerated in March as industrial
production rose 7.2% over the same month last year, which was down from
the 8.9% expansion registered in February. Despite the March reading,
the annual average growth rate of industrial production increased from
7.8% in February to 8.0%.
Healthy
business confidence suggests stable domestic demand
Business
confidence remains healthy and suggests stable domestic demand in the
second quarter. According to the National Statistical Institute’s (INDEC)
industry expectations survey published on 28 April, 61.7% of the
companies surveyed anticipate that domestic demand will remain stable in
the second quarter of the year, while 36.7% expect an increase and just
1.6% predict a decline. The results show that an increasing number of
companies expect stable or increasing domestic demand in the second
quarter. In the first quarter survey, 51.6% of the companies surveyed
anticipated that domestic demand will remain stable in the first quarter
2006, while 42.2% expected an increase and 6.2% saw a decline.
Consensus Forecast panellists anticipate that economic activity will
accelerate noticeably in the second quarter of this year with growth
reaching 7.1%, up from the 6.6% growth forecast for the first quarter.
However, economic activity is likely to slow further throughout the
second half of the year with the full-year growth rate reaching 6.9%,
which is up 0.1 percentage points from last month’s Consensus Forecast
figure, above the Central Bank’s 6.2% forecast figure but a notch below
the government’s 7.0% estimate. Next year, Consensus Forecast
participants expect growth to moderate further with GDP expanding 4.5%.
Inflation rises despite the freezing of prices
In
April, consumer prices rose 0.97%, which was down from the prior month’s
1.20% spike but exceeded the 0.84% increase expected by Consensus
Forecast panellists. The April price rise was broad-based, with
clothing, housing and recreation prices registering the highest
increases. Despite the April deceleration, annual inflation rose from
11.1% in March to 11.6%, which exceeds the Central Bank’s 8% to 11%
inflation target range for this year. The rising inflationary pressures
observed since the beginning of last year have persisted despite a
government agreement from
1 February
with major national supermarkets and multinational companies to freeze
prices on 150 basic consumer goods for one year. Consensus Forecast
participants expect the upward trend in consumer prices to remain in
place until the end of this year with inflation reaching 12.6% this
year, which is down 0.1 percentage points from last month’s forecast.
Next year, panellists anticipate price pressures to persist with annual
inflation reaching 12.4%, which is unchanged from last month’s estimate.
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