MercoPress. South Atlantic News Agency

Private sector economists say Argentina is in recession

Argentina's industrial production in April plunged 9.1% on the year, economic think tank Orlando J Ferreres & Asociados reported this week. The April drop follows a 9% decline during the first quarter of 2009 and a 5.6% drop during the fourth quarter of 2008, according to the report.

“Lower global demand is affecting Argentine exports and the price of those exports, forcing the country to reduce production plans,” Orlando J Ferreres said. The declining production is expected to continue for at least two more quarters, according to the think tank.

The report highlights the increasingly pessimistic data reported by private sources, which stand in stark contrast to the upbeat figures coming from the government of President Cristina Fernandez de Kirchner.

March output fell 6.6% from the same month a year earlier, according to the Argentine Industrial Union, or UIA, which represents the country's leading manufacturers. That puts first-quarter industrial production down 10.1% on the year, the UIA said.

The national statistics agency, Indec, said its index of industrial production in March fell just 0.4% on the year and that first-quarter production was down just 2.1%.

However, according to the UIA: “As in previous months, strong declines in automotive production and base metals output, two sectors which have most contributed to industrial growth [in recent years], explain the overall decline in output,” the UIA said.

These two sectors, which represent 18.3% of industrial output, declined by 31.4%, the UIA said.

Virtually all private-sector economists say they believe Indec data don't accurately reflect inflation, poverty, economic growth or industrial production.

By sectors the Argentine Steel Industry Center revealed that although there was a slight recovery over March in April, 7.7%, overall in the first four months of 2009 the contraction reached 42.3%.

This means the steel industry is working at half its production capacity, “waiting for the recovery of the sectors linked to the industry” said the industry’s center in reference to construction, auto and equipment manufacturing. The Argentine auto industry contracted 39.2% during the first four months of the year. Similarly, sales of farm machinery during the first quarter dropped 61%.

The construction industry index shows that activity in the sector during April fell 12% over the same month a year ago.

“Global activity has worsened because the crisis has begun to impact the services sector”, said economist Orlando Ferreres. “In manufacturing recession is established in the durable goods sectors and those linked to immediate consumption (food, beverage, tobacco, health) are doing better as people invest their income in the indispensables and delay major decisions”.

Ferreres estimates global activity in April dropped 5.8% compared to a year ago, “goods production is down 9.3% and services 3.7%”.

However for consultant April Rubinstein the contraction is in the range of 5.1% in spite of good showings in Transport, Communications, Education, Services and Health.

If these numbers are correct the Argentine economy is already in recession because it accumulates seven months running of falling activity.

However Argentine president Cristina Fernandez de Kirchner has been adamant to accept the word recession.

“We’re going to continue growing in Argentina and there is no way we will enter into a recession” the President said in a joint news conference with Venezuelan President Hugo Chávez after the two leaders met in Buenos Aires.