September data shows Argentina has narrowly avoided recession

Argentina’s economic activity increased by 0.5% in September compared to August, and by 5% relative to the same month of the previous year. The economy grew by 0.5% in the third quarter overall, avoiding a recession. Tuesday’s figures from the government’s INDEC statistics institute came as a surprise to some analysts, who were expecting the country to dip into recession. Every sector of the economy grew year-on-year, except for industrial manufacturing (which fell by 1%) and public administration and defense (down 0.7%), the numbers showed. Fishing and finance grew the most compared with last year, up 58% and 40% respectively. Finance had the greatest positive impact on the index. Before the INDEC’s report was published, consultancies had forecast a year-on-year slump. If the country’s GDP had shrunk for two consecutive quarters, Argentina would have entered a recession. However, after accounting for September’s 0.5% increase over August, the average for the third quarter was 0.5% higher than the second quarter. In its monthly report, EcoGo consultancy said that, after rebounding in the first half of the year, the economy stagnated between July and September because of “real interest rates and weaker domestic consumption.” Economist Sebastián Menescaldi, an associate director at EcoGo, said that their estimates were calculated in the wake of ruling party La Libertad Avanza’s defeat in the Buenos Aires provincial elections. “The expectations were not good,” he told the Herald. “Going forward, there will be some recovery, but not a huge one, because there are no factors that would allow us to explain the growth.” Menescaldi said demand could grow, but not necessarily the supply, as part of the increased consumption could be met by imports if financing is available.  “We are forecasting growth of around 2% [for 2025], not much more,” he added. IPA, an association of small and medium enterprises, said that Argentina’s growth remained “weak and uneven” after the October midterm elections.  “Positive indicators are more a statistical rebound than a real recovery, while post-election expectations have partially moderated uncertainty, although key sectors remain at critical levels,” IPA said in its latest report. Since December 2023, when President Javier Milei took office, 290,000 formal jobs have disappeared — in other words, Argentina has been losing an average of 15,000 jobs every month since then. “The manufacturing industry faces a consolidated technical recession, with installed capacity utilization at 59.4% and only a few sectors showing marginal rebounds,” IPA’s report said, adding that 86% of industrialists anticipate stagnation or deterioration in activity, limiting investment and hindering recovery. CAME, the Argentine Confederation of Medium-Sized Enterprises, said in its report that, during September, industrial production by SMEs recorded a year-on-year decline of 5.2%. This marks five consecutive months of decline, with a particularly sharp drop of 1.8% compared to August. “In September, the industrial sectors surveyed showed a continuation of the recessionary scenario, marked by weak domestic demand and a loss of household purchasing power, they added.  “The opening up of imports, competition from foreign products, and the end or transition of the season harmed sales levels.”