Activity in the manufacturing, agriculture, and the financial services sectors were most dynamic during the second quarter of 2013.
IHS Global Insight perspective | |
Significance | Argentina's official data show an increase in seasonally adjusted GDP during the second quarter of 2013, compared to the growth registered in the first quarter of the year. |
Implications | The still-significant annual growth rate in domestic demand continues raising concerns because it is a result of individuals shielding themselves against inflation by purchasing goods and services. |
Outlook | In the next few quarters, economic activity is expected to show more moderate dynamism despite the manufacturing sector moving beyond the negative impact of import barriers, which reduced the availability of intermediate inputs. Nonetheless, economic growth will continue to be driven by private-sector consumption as Argentines try to shield themselves from observed inflation rates via consumption of durable and non-durable goods. |
The National Institute of Statistics and Census (INDEC) of Argentina released figures for GDP in the second quarter of 2013, showing questionably positive annual results. Argentina's GDP expanded 8.3% year-on-year (y/y) in April-June. In addition, the positive result observed in the previous quarter has been followed by an improvement in performance in quarter-on-quarter (q/q) terms, according to the data released. Indeed, taking into account seasonally-adjusted figures, GDP increased 2.6% q/q during the second quarter of 2013.
In annual terms, Argentina's GDP growth was influenced mainly by still-increasing domestic demand and an expansion in external demand. At the same time, the volume of imports increased despite the import barriers imposed by the government, up 21.3% y/y in the second quarter of 2013. Household demand growth accelerated in comparison with the previous year, from 4.2% y/y in the second quarter of 2013 to 9.2% y/y in 2013. Gross fixed-capital formation posted an annual expansion in the second quarter of 2013 as investment in construction activities by the private sector, and to a lesser extent in machinery and equipment, increased in April-June 2013.
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By sector, GDP averted an annual rise in the second quarter, due to significant growth in the service sector, up 8.8% y/y – which accounted for 63.5% of GDP. Indeed, activity in the financial intermediation sector expanded 24.1% y/y, the transport, haulage, and communications sector rose 9.1 y/y, and public sector services increased 2.9% y/y. Meanwhile, activity in the manufacturing sector increased 4.1% y/y, while construction activity rose 2.2% y/y. According to data from the monthly industrial production survey, industrial manufacturing barely increased in the first five months of 2013 (up 0.6% y/y). Meanwhile, there was an expansion in the retail and wholesale services, up 14.2% y/y.
Outlook and implications
Argentina's GDP expanded 5.8% y/y in the first half of 2013. This is a surprising and rather questionable acceleration when compared to the 2.3% y/y registered in January-June 2012. Moreover, there seems to be speculation regarding the possibility of politically driven better than expected GDP growth rates. According to the press release, the acceleration in economic activity was not only a result of the robust private consumption but also a strong increase in investment – mostly in equipment. Argentines have been in a consumption binge since the gap between the perceived inflation rate and the official one widened; moreover, all the exchange rate control measures taken in the past couple of years have made it more difficult to use the preferred savings tool (US dollars), thus inducing consumption in order to shield their earnings from inflation. Meanwhile, although the agriculture sector posted a strong increase in value added (up 18.5% y/y in H1 2013), the volume of exports shrunk 22.9% y/y in the first half of 2013. Foreign-exchange controls have created a wedge between the official exchange rate and the parallel market exchange rate, which in turn serves as an implicit tax to the export sector as their earnings are disbursed in local currency using the official exchange rate that does not fully reflect the increase in costs observed in the country. The press release also shows that the volume of imports increased 13.6% y/y, while the value of imports of goods and services rose 27.8% y/y, demonstrating greater availability of imported goods in 2013 with respect to the previous year. A 5.8% GDP expansion in the first half of 2013 will most likely push the full year growth rate to at least 3.22%, which implies that the government will have to pay the GDP warrants in December 2014.