Saturday , October 23 2021

The economy experienced a recession after falling 5.8% in September



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Source: AFP – Credit: Archive

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

With official data that

economic activity

fell 5.8% in September, confirming that the country entered a recession after two consecutive quarters of fall. Yesterday, that

Indec

It publishes a Monthly Measurer of Economic Activity (EMAE), which shows a contraction of 1.9% in relation to the previous month. In this way, the third quarter of this year fell 0.4% in connection with the second, which has decreased by 4.1% in relation to the first.

EMAE has had six consecutive months with negative results as a result of devaluations, droughts and high interest rates. From January to September inclusive, economic activities accumulated a loss of 1.5%.

According to the statistical entity, the branches of activity with the largest incidents in contraction are wholesale, retail and repair (-12.8%); manufacturing industry (-10.8%), and transportation and communication (-4.6%).

Meanwhile, fisheries (2.8%), financial intermediation (2.6%) and agriculture, livestock, hunting and forestry (2.2%) are the sectors with the best results in September.

"With this data, successive second quarters ended with activity down (-4.1% and 0.4%, respectively), confirming the start 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 recession of 2002, 2009 and 2012. These bets will mimic the dynamics of 2012, with a relatively fast rebound, or at least slow down the trend in a shorter period than in 2002 or 2009, " they were shown in the LCG consultation.

For their part, Ecolatina explained that "eliminating the negative effects of drought (the agricultural sector grew 2.2% year-on-year in September), the economic contraction responded mainly to two factors: an increase in the exchange rate and accelerated inflation".

"The consequent reduction in purchasing power in dollars and pesos lifted demand for durable goods and consumer goods, which caused companies to reduce production to a minimum given the ever-increasing financial costs of maintaining high stocks in the context of depressed sales. In addition, especially in September, sudden exchange rate movements and hopes for a new agreement with the IMF caused uncertainty to govern, crippling decision makers of economic agents, "they added.

For the last quarter of this year, Ecolatina expects that "statistics show a deepening of the recession, which will leave the year with an activity rate of 2.4% lower than that achieved in 2017. For a significant reduction in production of goods (accumulated fall of 5% in nine months the first of this year), greater service deterioration will be added (they accumulate until September, up almost 1%). The fall in the same provisions will accelerate in the final months of this. This is a sign of the significant impact of real wages on activity levels through personal consumption (component representing 70% of domestic demand), due to deteriorating real wages, as a result of accelerating inflation. In addition, public consumption will retreat as a result of tightening fiscal targets ".

In their LCG they concluded: "It is difficult to predict when activities will effectively reverse the recession trajectory caused by a devaluation leap." In order for this to happen, it is first necessary to achieve a situation of exchange stability to begin moving forward in the process of gradually reducing interest rates. flower. "

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