The economy heads down while politicians head nowhere
National accounts for Q3 2022 corroborate the weakening trend in economic activity. While in H1 2022 economic activity was stagnant, in Q3 seasonally-adjusted GDP fell, to its lowest level since Q2 2021. Investment reverted the decline of Q1 2022, returning to Q4 2021 levels. By contrast, household consumption already seems to have entered a recession. Exports had a small seasonally-adjusted quarterly expansion. The quarterly contraction of economic activity was widespread among sectors.
The current account deficit extended its downward trend. As we mentioned in a previous report, the probability of this CAD triggering massive capital outflows (a sudden stop) is extremely low. So far there are no signs of external financing problems. This is not a case of “twin deficits,” which often end up in a balance of payments crisis. As consumption continues to fall, imports will follow, and the current account will improve.
Recent data show new signs of weakness in the labor market. Employment levels are moving from stagnation to moderate contraction. The unemployment rate increased slightly, from 7.9% to 8%. In September, both wages and labor costs continued to fall in real terms.
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