Domestic Demand in Argentina
Argentina - Domestic Demand
Economic contraction sharpens in Q4 2018
According to the Statistical Institute (Instituto Nacional de Estadísticas y Censos, INDEC), economic activity in the fourth quarter plummeted 6.2% in year-on-year terms, the weakest result in over nine years. On a quarter-on-quarter basis, the economy shrank 1.2% in Q4, following the 0.5% drop observed in Q3. The fourth-quarter’s print therefore means GDP for 2018 as a whole contracted a notable 2.5%, in sharp contrast from 2017’s healthy expansion.
The fall in Q4 reflected a huge contraction in the domestic economy and was also heavily affected by the sharp devaluation of the peso in late August and by the resulting jump in interest rates and financial turmoil. Domestic demand tumbled 14.8% following Q3’s 5.0% drop, with private consumption plunging 9.5% in Q4 following Q3’s 5.4% contraction. Consumer spending was hard hit by high unemployment, the lagged effects of a staggering depreciation of the peso in late August and continued subsidy cuts in public utilities. This translated into escalating inflation and eroded consumers’ purchasing power, dragging down consumer confidence in turn. Moreover, fixed investment nosedived 25.0% in the fourth quarter, following a softer 11.7% fall recorded in the previous quarter, owing to a sharp contraction in machinery and transport equipment. Meanwhile, government consumption contracted 5.1% in Q4. This followed Q3’s 4.2% contraction and again reflected the government’s intensifying efforts to rein in fiscal spending and reduce the fiscal deficit.
The external sector’s performance, in contrast, improved substantially, thanks to both a notable contraction in imports and a solid expansion in exports. Imports declined 26.1% in Q4 (Q3: -10.2%), reflecting shrinking domestic demand and the much weaker peso. Exports, meanwhile, rebounded to a 10.4% expansion in Q4 (Q3: -6.2%), thanks to improved agricultural production in the quarter.
The economy should gradually leave recession behind this year, while rising agricultural output and shrinking domestic demand should sizably reduce the current account deficit. That said, high inflation and interest rates will weigh on consumer spending and fixed investment, with a notable contraction in public investment hitting the latter. The uncertain result of October’s elections and a global slowdown are the main downside risks to the outlook.
Argentina GDP Forecast
LatinFocus Consensus Forecast analysts see the economy contracting 1.1% in 2019, down 0.1 percentage points from last month’s estimate, and expanding 2.5% in 2020.
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||45.13||0.45 %||May 13|
|Stock Market||32,300||2.26 %||May 13|
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May 16, 2019
National consumer prices rose 3.4% over the previous month in April, coming in below March’s 4.7% month-on-month jump and ending a three-month streak of intensifying price pressures, according to the National Statistical Institute (INDEC).
May 9, 2019
Exports declined 5.0% in year-on-year terms in March, contrasting February’s 3.7% increase.
May 7, 2019
Industrial production shrank an abysmal 13.4% over the same month of last year in March, according to data released by the National Statistical Institute (INDEC) on 6 May.
May 2, 2019
The monthly indicator for economic activity (EMAE, Estimador Mensual de Actividad Económica) contracted 4.8% in annual terms in February, a softer drop than the revised 5.8% plunge recorded in January (previously reported: -5.7% year-on-year).
April 30, 2019
The Universidad Torcuato di Tella (UTDT) consumer confidence index dropped to 34.4 points in April from 34.8 points in March.