Peru: Economic activity weakens in October
December 15, 2011
In October, economic activity increased 5.1% over the same month the year before, which was below both the 5.8% expansion observed in September and market expectations that had economic activity maintaining the pace at 5.8%. The reading marked the weakest expansion since January 2010. The October result reflected a contraction in manufacturing (-0.78% year-on-year) and in both mining and hydrocarbons production (-0.71% year-on-year). In contrast, commerce expanded a healthy 8.7% year-on-year. On a negative note, protests that halted a gold mine project in the Cajamarca region in November last year have clouded the outlook for investment in the mining sector. Despite the government's efforts to pacify opposition to the project through an environmental protection plan and pledges to spend more money on infrastructure near the mine, the stand-off over the project has challenged the Humala administration. Consequently, President Ollanta Humala, who assumed office on 28 July 2011, shuffled his cabinet on December in order to halt a wave of anti-mining protests that could delay USD 50 billions worth of foreign investment in the mining sector over the coming decade. A month-on-month comparison corroborates the deceleration suggested by the annual figures, as economic activity grew a seasonally adjusted 0.16% over the previous month, which was below the 0.24% expansion observed in September. As a result of the monthly deceleration, the trend continues to suggest a moderation in economic activity, with annual average growth falling from 7.8% in September to 7.5% in October, thus marking the slowest pace in a year.
Author: Ricardo Aceves, Senior Economist