Peru: Economic activity growth slows from April’s record high in May
Economic activity grew 47.8% in year-on-year terms in May, which was below April’s series-high 58.5% increase but still marked the second-best result on record. May’s increase was in large part due to a low base effect, with May 2020 coinciding with a steep decline in activity due to the outbreak of the pandemic and associated stringent lockdown measures: Compared with May 2019, the economy contracted 0.4%, hinting at still-subdued underlying dynamics. Looking at the breakdown by sector, rapid accelerations in hospitality services, transport, construction and mining drove the overall reading this month.
On a monthly basis, economic activity increased 3.7% in May, which contrasted April’s 1.1% fall. Meanwhile, the trend improved, with the annual average variation of economic activity coming in at an over seven-year high of plus 5.6% in May, up from April’s minus 1.1% reading.
Looking ahead, June is likely to see another sizeable albeit slower rise in activity, as the favorable base effect that boosted May’s result reduces. Meanwhile, the protracted announcement of Pedro Castillo as president-elect after early June’s run-off elections will have increased economic uncertainty during June, potentially weighing on activity somewhat.
Regarding the outlook for Q2, analysts at Credicorp Capital commented:
“In Jun-21, economic activity will have grown 25% yoy (Jun-20: -18%), so the GDP growth would have reached 41.5% yoy in Q2 2021 after falling 30% in Q2 2020. In seasonally adjusted terms, activity would have fallen by 1.0% mom. [However], Most of the BCRP Survey on Macroeconomic Expectations indicators showed a decline compared to May-21. Specifically, 12-month economy expectations fell to one of the lowest levels on record (47), comparable to the observed in the global financial crisis (44), and in 2Q20 due to strict lockdown (41).”