MercoPress. South Atlantic News Agency

Argentina February economic activity expands 5.2%, but surprises ahead for industry

Over half of Argentine car exports go to Brazil which is battling with a flattened economy

Argentina's economy grew at an annual rate of 5.2% in February according to the country’s stats office Indec monthly economic activity report Emae, reflecting good performances in construction and manufacturing. But prospects for the industrial sector could have some surprises.
The Emae indicator rose 0.3% in seasonally adjusted terms from January, Indec added.

The market had expected the economy to expand 4.5% on the year, according to the median estimate of more than 50 banks, economic research firms and universities surveyed by the Central Bank of Argentina.

The economy grew 8.9% in 2011, thanks to a surge in government spending in the run-up to October's elections, loose monetary policy and consumers spending on durable goods like cars.

The economy is expected to grow at a slower pace this year due in part to foreign exchange and import controls. The central bank's latest estimate puts GDP growth at 6% this year, though many private-sector forecasters are much less bullish.

Likewise industrial production grew less than expected in March, likely due to import restrictions and softer exports. In seasonally adjusted terms, industrial output rose 1.8% from March 2011, and increased 1.9% from February, reported Indec.

The government was expected to report that manufacturing activity increased 2.4% on the year, according to the median estimate surveyed by the Central bank.

Recent economic data painted a mixed picture of industrial activity in March. Auto production fell 4% on the year to 67.677 vehicles, but rebounded almost 25% from February. Raw-steel output increased 5.4% on the year and was up 10.4% from February at 471.000 metric tons.

Looking ahead Argentine industry faces several challenges: Brazil that is trying to boost its flattened economy (Argentina ships half its car production to its Mercosur main partner); double digit salary increases for the heavily unionized workforce; inflation in the range of 25% in spite of the official 9.8% from Indec and shortage of machinery, parts and components because of the government’s strict restrictions on all imports with the purpose of pruning the country’s purchases abroad.