Macroeconomic Forecast Argentina

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The economy continues to face significant headwinds with the EMAE economic activity index having contracted for a third consecutive month in July. The index shrank by 1.5% y-o-y, significantly weaker than consensus projections. For Q209 as a whole real output shrank by 0.8% according to Indec. Consumer spending and industrial production have continued to sag, with the latter falling by 1.4% y-o-y in August. As we have underscored previously the questionable statistical reporting of the authorities mean that official data have to be read with care, and that the actual numbers could be much worse. Although economic sentiment is improving, as reflected in the dizzying rebound in the stock market, we still do not believe that the Argentine economy is likely to stage anything like a V-shaped recovery but more probably will stage a slow return to trend.