ARGENTINA – Better activity in October, but deceleration at the margin

The sequential marked deceleration affected all sectors but Construction

Economic activity improved in October. The EMAE (official monthly GDP proxy) grew 5.2% YoY in October, following a downward revision to 3.2% in September (from 3.8%) and a 4.3% gain in August. At the margin, activity increased by 1.1% QoQ/SAAR, down from 3.5% in the quarter ending in September, reflecting a 0.2% MoM/SA expansion in October and a revised decline of 0.3% in the previous month (down from a 0.1% gain previously estimated by INDEC). The EMAE is 2.8% higher in the first ten months of 2017 than in the same period a year earlier.

Construction sector leads broad-based growth. Public sector infrastructure expenditures drove construction growth to 18.8% YoY in October and 14% YoY in the quarter ending in October.  Manufacturing increased by 4.3% YoY in the same month (consistent with the recovery in Brazil) and 3.6% YoY in the last three months as of October, relative to the same period one year ago. The Service sector gained 4.6% YoY in October and 4.1% YoY in the quarter ending that month, reflecting the increase in consumption. Finally, agriculture and other primary activities increased by 4.4% YoY in October.

According to our seasonal adjustment, the sequential marked deceleration affected all sectors but Construction. Manufacturing fell 5% QoQ/SAAR in October, due to the significant downward revision in September. Service growth decelerated to 1.6%, from 4.4% in the previous quarter, while primary production activities contracted by 2.5% QoQ/SAAR. On a different note, Construction expanded by an annualized 15.3% QoQ.

We forecast growth of 2.9% this year and 3.5% in 2018. A positive statistical carry-over (0.6% as of October) and improved sentiment for investment will, in our view, likely help to sustain economic growth. The downward risks to our forecast depend on the impact of new rounds of hikes in regulated prices on consumer confidence and the high ex-ante real interest rates.

Juan Carlos Barboza
Diego Ciongo    

Fuente: ITAU

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