Wednesday , November 25 2020

The economy entered recession after a 5.8 percent decline in September




Source: AFP – Credit: Archives

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

With official data that

economic activity

fell 5.8% in September, it was confirmed that the country entered a recession after two consecutive quarters in the autumn. Yesterday,

Indec

He publishes the Monthly EMAE, which shows a contraction of 1.9% over the previous month. Thus, the third quarter of the year fell by 0.4% compared to the second, which fell by 4.1% compared to the first one.

EMAE has six consecutive months with negative results as a result of devaluation, drought and high interest rates. Between January and September, economic activity gained a loss of 1.5%.

According to the statistical unit, branches of activity with the greatest influence on the contraction are wholesale, retail and repair (-12.8%); manufacturing (-10.8%), transport and communications (-4.6%).

Meanwhile, fishing was the best in September (2.8%), financial intermediation (2.6%) and agriculture, livestock, hunting and forestry (2.2%).

"With this data, the second consecutive quarter ended with a decline in activity (-4.1% and 0.4%), confirming the start of a new recession compared to other recession periods – eight months after the last ceiling (January) – the current decline in the activity is similar to the recessions of 2002, 2009 and 2012. The pledge will be to copy the dynamics of 2012 with a relatively rapid rebound or at least to slow the downward trend in a shorter period since 2002 or 2009, "the LCG advises.

For its part, Ecolatina explained that "the dispersal of the negative impact of drought (the agricultural sector grew by 2.2% on an annual basis in September), the economic contraction responded mainly to two factors: an increase in the exchange rate and an acceleration from inflation ".

"The effects of the decline in purchasing power in dollars and pesos have driven the demand for durable and consumer goods, which has led companies to reduce production to a minimum, given the rising financial cost of maintaining high stocks under reduced sales. in September, sudden exchange rate movements and expectations for a new IMF deal led to uncertainty in government, paralyzing the decision-making process of economic agents, "adds and hate.

For the last quarter of the year Ecolatina expects that "the statistics show a deepening recession that will leave the year 2.4% lower than the one achieved in 2017. To a significant reduction in commodity production dropped 5% in the first nine months of the year), there will be a further deterioration in services (they accrue to 1% by September) The fall in the provision will accelerate in recent months This is a sign of the significant impact of real wages on the level of activity through private consumption (comp HT, which represents 70% of domestic demand) due to greater deterioration of real wages as a result of the acceleration of inflation. In addition, public consumption will come back as a result of the tightening of fiscal targets. "

In the LCG, they concluded: "It is difficult to predict when action will effectively become the recession trajectory caused by the devaluation surge." To do this, it is necessary first to achieve exchange stability in order to start progressing in the process of gradually reducing interest rates. interest. "


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