Argentina: Economic growth moderates but remains strong
December 17, 2010
In the third quarter, GDP rose 8.6% over the same period the year before. The reading represented a deceleration compared to the 11.8% increase recorded in the previous quarter but was virtually in line with market expectations of an 8.4% rise. The deceleration over the previous quarter was the result of a moderation in the domestic sector, while the external sector improved slightly. Total consumption added 8.8% over the same quarter of the previous year, inching down from the 8.9% increase recorded in the second quarter of 2010. Meanwhile, gross fixed investment increased 26.6%, up from the 18.9% rise recorded in the second quarter. The expansion marked the third positive result after five quarters of contraction, and represented the highest annual increase since the last quarter of 2005. That said, a negative shift in inventories contributed to the slower in the domestic sector. Exports of goods and services jumped from an 18.2% increase to a 27.8% rise, while imports added 37.4%, up from the 35.6% rise recorded in the previous quarter. As exports improved more than imports, the net contribution from the external sector to overall growth improved from minus 1.4 percentage points in the second quarter to minus 0.9 percentage points in the third. At the sector level, the deterioration reflected slower growth in the agricultural sector. The second quarter benefited from a bumper corn and soybean harvest, contrasting the dismal result experienced in 2009 due to the drought, and helped the agricultural sector jump an annual 63.5%. As the impact of this base effect diminished in the third quarter, growth in the sector slowed to a much more moderate but still robust 6.4% rise. Meanwhile, industrial production stepped up from an 8.3% expansion in the second quarter to a 9.7% rise in the third. The services sector increased 7.4% (Q2: +7.8% yoy). A quarter-on-quarter analysis corroborates the deceleration seen in annual figures, as GDP expanded 0.37% over the previous quarter in seasonally adjusted terms, after having increased 2.68% in the second quarter. The Central Bank believes that the economy will grow between 8.9% and 9.5% in the full year 2010. Consensus Forecast panellists share/don't share this assessment and see the economy growing 6.9% in 2010. For this year, panellists see the economy growing 4.0%, which is unchanged from last month's forecast, while in 2012, they expect the economy to grow -.-%, which is up/down from last month's forecast.
Author: Armando Ciccarelli, Head of Data Solutions