MercoPress. South Atlantic News Agency

Prolonged stagnation reported in Argentina

Over 60% of Argentine companies project a better situation in a year

Argentina's Industrial Union (UIA) released a study last week showing simultaneous declines in production, sales, employment, and finances. The UIA's Industrial Performance Monitor (MDI) remains below the expansion threshold for the 14th consecutive survey, signaling a deepening contraction across all sectors, driven by weak demand and rising costs.

The survey revealed a sustained pattern of decline in the industrial sector, affecting production, demand, employment, and financial health for over a year. The contraction continued through October and November, despite a calmer post-election financial environment.

The MDI closed October at 43.8 points, its 14th consecutive reading below the 50-point expansion threshold. This 5.2-point year-over-year drop confirms an extended deterioration across all sectors, with Textiles and Metal industries being hit the hardest.

A 40.3% of Argentine companies reported a drop in production, significantly outweighing those reporting increases, which amounted to 21.3%. In addition, 47.4% of firms posted decreases in domestic sales, highlighting a widely spread weak demand.

Regarding employment, 21% of companies reduced their staff, remaining one of the highest recorded percentages, with work shift reductions (23.5%) and suspensions (7.7%) hitting businesses of all sizes.

Nearly half of the companies (47.5%) struggled to meet at least one key payment, most commonly taxes and suppliers, while 8.2% reported being behind on all payments, due to activity.

Supply times are shortening, and raw material stock is up, signaling a normalization of supply after tensions in late 2023. However, this improvement has not translated into a recovery in industrial activity.

The main challenges cited by the industry were a drop in internal demand (cited by 40% of the sector); and rising costs, including labor's 45.4%, amid shrinking demand.

While over 60% of companies project a better situation in a year, the UIA includes a note of caution, reminding that past expectations have not aligned with actual outcomes. Capacity utilization is at 57.9%, and 95.2% of firms expect to reach their optimal operational level only in 2026 or later, reflecting the expected duration of the contractive cycle.