Getting ready for a dive
The downward trend in economic activity continues to deepen. Weak figures are due in large measure to a strong deceleration in consumption. Various factors are hitting consumption simultaneously: a weak labor market, falling real wages, stagnant consumer credit, no more excess liquidity and political uncertainty. If consumption looks bad, investment is even worse: financial conditions continue to deteriorate, construction costs have increased and currency depreciation is hitting imports of machinery, equipment and construction materials, while political uncertainty lowers business confidence. In August the trade deficit reached $990 million, its highest level since 2012.
Even though employment increased (unlike last month), job creation was low compared to previous quarters. After a pause in the previous rolling quarter, the unemployment rate rose again. But it is not all bad news: the private payroll looks better than self-employment. To the sluggishness in job creation, one should add the weakness in wages, which deepened in July.
After several months of readings that stayed in line with market expectations, August CPI strongly surprised again on the upside. The figure undoubtedly surprised the Central Bank as well, and conditions the next monetary policy decision. The August CPI shows higher than historical pass-through of all the factors that are pushing prices upwards. August's CPI increases uncertainty even further.
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