Economic activity recovery continued in 2Q17.
Economic activity recovery continued in 2Q17. The EMAE (official monthly GDP proxy) increased 0.6% relative to April, bringing annualized quarter-over-quarter growth to 2.3%, from 0.3% in the quarter ending April. On a year-over-year basis, the index grew by a solid 3.3% in May and 1% in the first five months of the year. Activity recovery could also be seen in IGA (a GDP proxy published by OJF consulting firm), which increased 0.1% between April and May and 4.0% year over year.
Construction and primary activities (agriculture and fishing) continue lead growth on a year-over year basis (8.4% and 4.2% respectively in the quarter ending in May). The service sector registered a new improvement expanding now at 2.5% in the quarter. Manufacturing entered in positive ground, growing 0.4% in the same period after posting fourteen months in contraction. According to our own seasonal adjustment, on a sequential basis construction expanded strongly (16.2% qoq/saar), followed by Services (5.9% qoq/saar). Manufacturing grew 0.7% while Agriculture contracted 0.9% after registering strong growth rates earlier in the year.
So, the recovery is becoming more broad-based. Construction continues to benefit from higher public spending, while the Services sector is consistent with an improvement in private consumption. Meanwhile, manufacturing sector is posting positive growth rates (consistent with a better performance of manufacturing exports).
We expect the economy to grow 2.5% in 2017. The carry-over of EMAE yields a 2.3% year-over-year expansion in 2Q17, which would be a significant improvement relative to 1Q17 (0.3%). We expect construction to drive growth accompanied by further improvements in services due to higher real wages and a modest recovery in the manufacturing sector.
Juan Carlos Barboza