Industry and construction collapsed in October and sounded the alarm about the state of the economy

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In October, two key indicators of economic activity showed the impact of continuing unabated inflation and the complications for importing inputs: Construction and industrial activity posted monthly declines of 3.5% and 1.1% respectively according to data released by the National Institute of Statistics and Censuses (Indec).

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In the year-on-year comparison, however, industrial activity grew by 3.5% compared to October 2021, while the construction sector presented a decline of 0.9%. Like this, inside In the first ten months of the year, industrial activity increased by 5.7% and Construction by 5.5%according to the official statistics agency.

According to the analysis by the consultancy firm LCG, “the industry is currently operating with an activity level only 0.8% higher than that observed in December, reflecting a stagnation during the year,” it said in its latest report.

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However, the official data show that, in the month of October, ten of the sixteen items of the manufacturing industry presented interim increases: compared to their incidence at a general level, there are increases of 5.1% in Substances and chemical products; 2.5% in Food and Beverage; 14.9% in motor vehicles and auto parts; 15.1% in Other equipment, devices and tools; 6.4% in base metal industries; 6.7% for Rubber and plastic; 6% in metal products.

However, they have been observed falls 5.3% in Furniture and mattresses and other manufacturing industries; 1.6% in Machinery and equipment; 4.7% in Textiles; 1.1% in Wood, paper, publishing and printing; 1.3% in tobacco; and 0.8% in Other means of transport.

As regards the qualitative survey published by INDEC to find out the opinion of companies in the various economic sectors, the expectations observed -both for the building and manufacturing industry- showed once again that to a greater extent, people in the industry do not expect major changes for the last quarter of 2022.

Among industrial entrepreneurs, 28.9% of those questioned estimate that domestic demand will continue to rise up to and including January, against 26.8% who expect a decline, while 44.3% do not perceive major changes.

As regards exports, 23% of those questioned believe that they will increase, 23.8% estimate a decrease and the remaining 53.2% do not expect major changes.

In this context, 33.6% of entrepreneurs believe that the use of their plant’s installed capacity would increase, against 25% who estimate the opposite and 41.4% who do not foresee major changes. For all this, 43 ,6% of those questioned believe that they will need more credits to produce, against only 6.8% who expected a decline and 49.6% who did not expect major changes.

The Secretary of Industry, José Ignacio de Mendiguren, said last week that “the vast majority of Argentine industrialists recognize the difficulties that exist due to the lack of dollars, but we have no doubts about the political decision of this government regarding the industry”. he stressed that the difficulties in accessing inputs “does not represent the unanimity of Argentine industry,” he said in radio statements.

About the panorama in Construction, which was already contracting, accentuated its decline with a 3.5% decline in October compared to the previous month. “In terms of accumulated year-over-year change, the 5.5% increase is explained by the growth observed through September,” explains a report from consultancy ACM.

And, from LCG’s point of view, with the fall of October, construction was 11% below the peak level reached in early 2018, coinciding with the all-time high in the sector.

As far as building consumables are concerned, the intra-year variations that stood out the most in the official survey were: taps, seamless steel pipes and flat glass for building, with 25.1% inter-yearly, Plasterboard with 5.4% y/y Sanitary ceramics with 5% y/y /un.

On the other hand, the changes in Portland cement (-0.8% y/y), lime (-1.1% y/y), plasters (-3.3% y/y), ceramic floor and wall coverings (-4, 9% y/y), granite and limestone mosaics (-9.9% y/y), building paints (-23.3% y/y) and asphalts (-24% y/y). In the end, the area authorized to build in m2 decreased by 21.9% YoYimplying an acceleration of the fall, highlighted ACM.

As for the future outlook, consultancy firm LCG expects the current level of the industry to serve as a ceiling. “Currently The lack of BCRA reserves increasingly compromises access to imports, affecting the availability of inputs for the sector. Furthermore, macro-political uncertainty acts as a counterweight in investment projects, which is combined with an increasingly suffering purchasing power, which is starting to have its correlate on demand”, he explained.

Source: Clarin

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