Domestic Demand in Argentina
Argentina - Domestic Demand
Economy contracts sharply in Q2
According to the Statistical Institute (Instituto Nacional de Estadísticas y Censos, INDEC), economic activity in the second quarter swung from Q1’s 3.9% year-on-year expansion to a sharp 4.2% contraction. The print comes after five consecutive quarters of growth and represents the lowest reading since Q3 2014. On a quarter-on-quarter basis, the economy plunged 4.0% in the second quarter, contrasting the 0.7% increase in the first quarter and marking the worst contraction in nearly ten years.
The downturn in Q2 reflected contractions in both domestic and external demand as well as the effects of severe drought. Domestic demand swung from a 6.4% expansion in Q1 to a 2.0% fall in Q2. Growth in private consumption decelerated notably from Q1’s 4.3% expansion to a slight 0.3% increase. Consumer spending was likely hit by a weaker currency and subsidy cuts in public utilities, which continued to fan inflation and eat into consumers’ pockets, as well as by falling confidence. Fixed investment rose 3.1% in the second quarter, far below the 15.7% figure recorded in the previous quarter. A sharp slowdown in construction activity growth and a downturn in the manufacturing sector were largely behind the weak quarterly expansion in fixed investment. Meanwhile, government consumption contracted 2.1% in the second quarter, a sharper fall than Q1’s 1.2% decrease. The decline again reflected the government’s efforts to rein in fiscal spending and reduce the fiscal deficit.
The external sector, meanwhile, performed poorly in the second quarter, as imports continued to grow while exports fell significantly. Growth in imports moderated from 15.6% in Q1 to 2.7% in Q2, while exports swung from a 6.4% expansion in Q1 to a 7.5% plunge in Q2. Softer growth in imports largely reflected weaker private consumption and shrinking demand for intermediate goods from industry, while the sharp contraction in agricultural output and the drop in industrial production weighed heavily on foreign sales.
A majority of FocusEconomics Consensus Forecast analysts now see the economy contracting this year, before returning to feeble growth next year. They see the economy shrinking 1.2% in 2018 and rebounding to 0.7% growth in 2019, down 1.2 percentage points from last month’s estimate.
Argentina GDP Forecast
Argentina - Domestic Demand Data
|Domestic Demand (annual variation in %)||4.0||-3.9||4.2||-1.3||6.3|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||6.69||0.15 %||Dec 17|
|Exchange Rate||36.60||0.45 %||Oct 11|
|Stock Market||29,598||2.26 %||Oct 12|
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October 5, 2018
On 26 September, the IMF announced a revamped and upgraded financing agreement to crisis-stricken Argentina, giving President Mauricio Macri’s government an economic lifeline until next year’s general election.
October 4, 2018
Industrial production contracted 5.6% in August over the same month of last year, according to data released by the National Statistical Institute (INDEC) on 4 October, which was marginally less than July’s 5.7% year-on-year decline. August’s reading reflected contractions in almost all components of the index.
September 28, 2018
The Universidad Torcuato di Tella (UTDT) consumer confidence index fell to 33.7 points in September from 36.3 points in August, marking the worst reading since February 2014.
September 27, 2018
Exports contracted 1.4% in year-on-year terms in August, contrasting July’s revised 1.8% expansion (previously reported: +1.7% year-on-year).
September 27, 2018
The monthly indicator for economic activity (EMAE, Estimador Mensual de Actividad Económica) contracted 2.7% in annual terms in July, a much softer drop than the revised 6.8% fall recorded in June (previously reported: -6.7% year-on-year).