Uruguay: Growth runs out of steam in Q4 2018
According to detailed national accounts data released by the Central Bank of Uruguay (BCU) on 28 March, growth lost traction in the final quarter of last year, confirming analysts’ expectations. Annual growth tumbled to 0.6% in the fourth quarter, from a revised 1.8% expansion in Q3 (previously reported: +2.1% year-on-year) and marking the weakest expansion in nearly three years. On a seasonally-adjusted quarter-on-quarter basis, the economy shrank 0.1% in Q4, matching the result observed in Q3. As a result, the fourth-quarter’s print brought full year growth down to a three-year low of 1.6% (2017: +2.6%).
The fourth-quarter cooling was largely driven by deteriorating domestic demand dynamics. Private consumption plunged 0.4% year-on-year in Q4, against the backdrop of feeble labor market metrics, high inflation and a weak peso. This marked the first contraction since Q1 2016 and followed a healthy 2.2% increase in Q3. On top of that, fixed investment declined 2.9% annually in the final quarter (Q3: +1.2% yoy) as tumbling investment activity in the private sector more than offset a timid uptick in public sector investment. On a more positive note, government consumption accelerated in the fourth quarter (Q4: +1.5% yoy; Q3: +0.7% yoy), as the government stepped up public spending in response to tanking growth.
Final quarter figures were similarly downbeat for the external sector, although they improved from the previous quarter nonetheless. Exports fell 4.9% in annual terms in Q4, compared to the third quarter’s 10.9% slump. This, coupled with plunging imports (Q4: -8.0% yoy: Q3: -0.8% yoy), drove an improvement in the external sector’s contribution to overall growth in Q4.