After two months of growth, economic activity slowed in September, by not presenting monthly variation in the seasonally adjusted measurement and falling in interannual terms. A trend that, despite the fact that the direct effects of the drought began to be left behind, could continue in the final months of the year. It is that consumption, one of the engines that helped keep the activity “afloat” for a good part of the year, could begin to shut down..
This is reflected in some sectoral surveys and estimated by private consulting firms, which predict that the economy will contract again in the last quarter.
By case, The EMAE registered a seasonally adjusted monthly variation of 0% in September, with a fall of 0.7% year-on-year. Among the main sectors that influenced the contraction were industry and commerce, which showed losses of 3.6% and 1.1% respectively.
In that sense, when analyzing what can be expected in the last part of the year in terms of economic activity, private consultants warn of the impact that lower domestic demand may have, in a context of high inflation and growing uncertainty, waiting for the economic programs of the next Government.
“The advance of consumption as a hedging mechanism against jumps in prices and/or exchange rates has functioned as a shock absorber of activity. However, we do not expect this condiment to remain for the remainder of the year. Rather, we understand that a state of caution could prevail among agents, delaying consumption and investment decisions,” the consulting firm LCG noted in this regard.
“From the supply side, the availability of foreign currency for imports will continue to condition the activity of industry and commerce,” the firm added, and projected: “In summary, we expect that, in the last quarter of the year, the activity will suffer again, resulting in a fall of around 1.3% average annual growth by 2023.”
Along the same lines, ACM predicts that by the end of the year ““The economy will continue to contract, especially due to political as well as economic uncertainty.” “The inflationary acceleration, the lack of foreign currency and the exchange gap probably have a negative impact on various sectors of the economy,” they detailed.
In fact, private consumption also showed a contraction in October. By case, The Consumption Indicator (IC) of the Argentine Chamber of Commerce and Services (CAC) had a decline of 1.5% in the interannual comparison, which implied a contraction of 4.3% compared to September in the seasonally adjusted measurement.
“October is the fourth consecutive month with a negative monthly variation and the first in 2023 with a year-on-year drop“, they pointed out from the entity, and detailed that the consumption indicator accumulated a growth of 3.2% year-on-year in the first ten months of the year, “although, in absolute terms, the loss of dynamism seen in recent months would continue to accentuate.” .
Future consumption prospects
“Leaving behind the exceptional positive value of last month, explained mainly by an advance in consumption resulting from electoral uncertainty and an expectation of price increases, The downward trend in the interannual growth rates exhibited by the IC continues as of January and marks a first negative value in the year in October 2023.“, they detailed.
Meanwhile, the CAC pointed out that “the moderate effectiveness of VAT refunds did not have a sufficient positive impact to maintain or increase the level of consumption in the short term.” “Inflationary expectations remain high and the signals given by the incoming government will be essential to moderate them“, they added from the entity.
“The performance of the Argentine economy and consumption present a similar behavior, which is expressed in interannual variation rates that usually increase or decrease along the same lines,” they concluded.
During the first months of the next Government, the outlook for consumption is uncertain. As an Ecolatina analysis prior to the runoff noted, “The correction of relative prices will accelerate inflation and it will be difficult for the salary to follow that dynamic”. “We anticipate that an improvement can only be observed in the second half of 2024. Likewise, this increase in inflation will occur in a context in which State assistance will be conditioned by the need to reduce the fiscal deficit, as well affecting the income available for family consumption”, detailed the analysis.
“These effects will impose a significant restriction on private consumption growth for much of 2024.. Thus, although activity could fall less than expected thanks to the contribution of the primary sector – agriculture and mining – which would result in greater exports and greater availability of foreign currency, this improvement will be compensated by private consumption that will not raise its head. until the end of the year,” they concluded from Ecolatina.
Source: Ambito
