Macchu Picchu Peru

Peru Economic Activity December 2020

Peru: Economic activity expands for first time in 10 months in December

Economic activity grew 0.5% in December (November: -2.8% yoy) marking the first increase in activity since February. Looking at the details of the release, stronger growth in the manufacturing sector and a milder contraction in the mining and hydrocarbons sector drove the overall reading.

On a monthly basis, economic activity rose at a faster rate of 2.1% in December (November: +0.9% mom). Meanwhile, the trend pointed slightly down, with the annual average variation of economic activity coming in at minus 11.1%, down from November’s minus 11.0% reading.

Going forward, activity is likely to be hindered by the rapid escalation of daily infections in Peru since the start of 2021. In response, authorities ordered the total lockdown of the capital and nine other regions at the end of January. Restrictions include the closure of all non-essential shops, suspension of travel between regions and instructions to work from home where possible.

As a consequence, Diego Pereira and Lucila Barbeito, economists at JP Morgan, see activity slowing in the short-term, before picking up later in the year:

“In all, we revise 1Q21 down into negative territory, calling for activity to end the quarter about 4% below December’s level, consistent with -16%q/q saar. For the second quarter of the year, we still see limited upside from better terms of trade and global demand, amid election uncertainty and risk of a third Covid-19 wave associated to the delays in securing vaccine supply.”

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