​Improving Q1 activity data combines with falling trade balance

ARGENTINA - In Brief 24 May 2017 by Esteban Fernandez Medrano

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INDEC’s monthly activity indicator (EMAE) reported yesterday a 0.8%y/y growth rate, for the month of March. With this result, the 1stQ17 GDP proxy closed with a rise of 0.2%y/y, the first growth rate since the 1stQ16´s 0.6%. It also compares positively to the a contractions of -2.1% in the 4thQ16 and -3.7% in the 3rdQ16. Furthermore, this improving trend coincides with the privately measured IGA activity proxy, which already published a +4.1%y/y growth rate for April (+0.9%y/y for the quarter Feb/Apr), suggesting further activity improvements down the road for the EMAE, a welcome confirmation for the improving activity discussions. In line with this incipient economic recovery and a still relatively stable FX rate (i.e. appreciating in real terms), April trade data (published yesterday alongside the EMAE) reaffirmed March’s ddecline in the trade balance. While imports grew 13.6%y/y (USD 4.96bn), export only grew 1.7%y/y (USD 4.82bn) in April. With this result the monthly trade balance closed with a USD -139n deficit, compared to the USD 372mn surplus in April last year. The 12 month accumulated trade balance continued to dropped for the third consecutive months to USD 867mn, down from USD 2.2bn in January. The trade composition confirms the picture of an economic recovery. The strong drop in net fuels exports (suggesting stronger domestic demand with less export capacity) combines with rising Capital Goods and Vehicle imports. We will follow up with analysis in our next monthly report.