The economy went into recession after falling 5.8% in September



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Source: AFP – Credit: Archive

The activity added two consecutive quarters with losses of 4.1% and 0.4% in the second and third respectively

With the official data that the

economic activity

fell 5.8% in September, it was confirmed that the country went into recession after falling two consecutive quarters. Yesterday, the

Indec

It published the Monthly Estimator of Economic Activity (EMAE), which presented contraction of 1.9% in relation to the previous month. Thus, the third quarter of the year fell 0.4% in relation to the second, which fell 4.1% in relation to the first.

The EMAE had six consecutive months of negative results due to devaluation, drought and high interest rates. From January to September inclusive, economic activity accumulated loss of 1.5%.

According to the statistical entity, the sectors with the highest incidence of contraction were wholesale, retail and repairs (-12.8%); (-10.8%) and transport and communications (-4.6%).

On the other hand, fishing (2.8%), financial intermediation (2.6%) and agriculture and livestock, hunting and forestry (2.2%) were the sectors with the best results in September.

"With this data, the second consecutive quarter ended with activity falling (-4.1% and 0.4%, respectively), confirming the beginning of a new recession, in relation to other recessive periods – eight months since the last ceiling (January) – the current decline in activity has been similar to the recessions of 2002, 2009 and 2012. The bet will be to copy the dynamics of 2012 with a relatively quick recovery, or at least delay the downward trend in a longer period short than in 2002 or 2009, "they pointed out in the LCG consultancy.

Meanwhile, Ecolatina explained that "it has eliminated the negative impact of the drought (the agricultural sector grew 2.2% year-on-year in September), the economic contraction responds mainly to two factors: the increase of the exchange rate and acceleration of inflation. "

"The consequent reduction in purchasing power in dollars and pesos shrank the demand for durable goods and consumer goods, which led companies to reduce production to a minimum due to the increasing financial cost of maintaining high inventories in a context of In addition, particularly in September, the sudden movements in the exchange rate and expectations of a new agreement with the IMF caused uncertainty to reign, paralyzing the decision-making of economic agents, "they added.

For the last quarter of the year, Ecolatina expects that "statistics show a deepening recession, which will leave the year with a level of activity 2.4% lower than that achieved in 2017. For the significant fall in the production of goods a fall of 5% in the first nine months of the year), a further deterioration of services will be added (they accumulate an increase of almost 1% in September) .The decrease in service provision will accelerate in the last months of the year. significant effect of real wages on the level of activity through private consumption (which represents 70% of domestic demand), due to a further deterioration of real wages as a result of the acceleration of inflation. as a result of tightening fiscal targets. "

At the LCG they completed: "It is hard to predict when the activity will effectively reverse the recessionary trajectory caused by the devaluation jump." For this to happen, it is necessary first to achieve a situation of exchange rate stability to begin to move forward in a process of gradual reduction of interest rates. interest ".

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