Argentina’s GDP grew on a year-over-year basis in 1Q17 after three consecutive drops. GDP increased by 0.3%, after a 1.9% decline in 4Q16. Growth was higher than the 0.1% gain anticipated by the monthly GDP proxy (EMAE). On a sequential basis, output increased by 1.1%, adjusted for seasonality, after rising by 0.7% in 4Q16.
Domestic demand picked up, driven by gross fixed capital formation. Domestic demand excluding inventories grew 1.3%, propelled by a 3% increase in gross investment. The year-over-year gain in investment followed a 5.9% decline registered in 4Q16. Consumption also rebounded: public consumption grew by 1% (up from -2% in 4Q16) while private consumption edged up by 0.9% (-2.4% previously). On a sequential basis, investment rose by 1.7%, while public consumption and private consumption increased by 2.1% and 1.4%, respectively.
Imports of goods and services continue to grow, supported by the appreciation of the currency. Imports grew by a solid 4.3% in 1Q17 relative to the same quarter one year earlier, following a 3.5% yoy increase in 4Q16. Exports of goods and services declined by 1.8% year over year after a hefty 7.7% gain in the previous quarter.
The GDP growth was led by primary activities. Agricultural sector activity increased by 4.3% yoy, while fishery activity grew by 31.1%. Transportation and communication activity increased by 3.7%, while financial intermediation and real estate activity rose by 2.4% and 2.7%, respectively. Manufacturing output contracted by 2.2%.
Looking ahead, coincident and leading private indicators suggest that the rebound in economic activity continued in the first months of 2Q17. We recently adjusted our 2017 GDP growth forecast to 2.5% from 2.7% to account for a likely slower expansion of the Brazilian economy (relative to our previous scenario).