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Peru Economic Activity August 2020

Peru: Softer decline economic activity in August

Economic activity decreased 9.8% year-on-year in August (July: -11.7% yoy), marking the best result since February as the staged reopening of the economy has helped foster a recovery in activity. The softer drop was primarily due to less pronounced falls in the commerce and construction sectors. Meanwhile, both the manufacturing and mining sectors contracted at a sharper pace in August, weighing on the overall figure somewhat.

On a monthly basis, economic activity rose 2.4% in August, which was well below July’s 8.3% expansion. Meanwhile, the trend pointed down, with the annual average variation of coming in at minus 9.5%, down from July’s minus 8.4% reading.

Regarding August’s reading, Paulo Mateus, an economist at Goldman Sachs, commented:

“The deep, broad-based annual real GDP contraction continued to reflect the austere restrictions to mobility and economic activity implemented since mid-March, which were among the strictest in LatAm. Sequential growth slowed in August and real GDP remains well below pre-COVID levels, suggesting that recovery towards pre-COVID levels will take place over an extended period (we expect full recovery only in 2022).”

Looking ahead, economists at Credicorp Capital see an improving but still-bleak panorama, given continued localized lockdowns and capacity limitations remaining in place for many restaurants and shopping centers:

“Our estimates suggest economic activity fell 8% y/y in Sep-20. On the one hand, […] electricity demand dropped 1.9% y/y (Aug-20: -2.8%), public investment declined 5% y/y (Aug-20. -25%), imports of capital goods declined 3.6% y/y (Aug-20: -22%) and imports of consumer goods fell 7% y/y (Aug-20: -25%). On the other hand, domestic cement consumption grew 7.1% y/y (Aug-20: +1.3%) and non-traditional exports advanced 7% y/y (Aug-20: +9.3%). Moreover, all current situation and macroeconomic expectations indicators in the BCRP survey continued to recover from the previous month, though still stand far from pre-pandemic levels.”

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