Argentina’s crisis deepens: industrial activity collapsed in December and has not rebounded since August last year

Preliminary reports estimate that manufacturing activity in Argentina would have plummeted between 0.3% and 0.6% in the last month of 2022, consolidating the dangerous recessive trend unleashed in August.

The shortage of foreign currency due to the currency ceiling is the main factor responsible for the crisis.

The recovery proclaimed by President Alberto Fernández does not appear.

All early indicators of industrial activity registered yet another fall by the end of December 2022, consolidating a recessive trend that has been pronounced since last August.

The advance index of industrial activity prepared by CEP-XXI, an indicator considering energy consumption based on Cammesa, concluded that manufacturing production had a new drop of 0.6% in December 2022.

This estimate serves as a preview of what will be released later with the manufacturing IPI prepared by INDEC.

CEP-XXI concludes that industrial activity plummeted by 2.7% compared to December 2021. For 2022, it would have accumulated a 4.5% rebound, mainly explained by the variation during the year’s first half.

Since the violent inflationary episode in July, the reactivation was aborted.

The automotive sector was one of the sectors most directly affected by the recessionary trend in December.

Although it recorded a good performance in the accumulated 2022, the Chamber of Automobile Manufacturers reported that automotive production was 37,119 units in December, 6.9% less compared to December 2021.

Likewise, another alarming retraction recorded in December was the poor evolution of sales in cement dispatches.

The Portland Cement Manufacturers Association (AFCP) reported a violent drop of 7.3% in December 2022 alone, up to 9.4% compared to the same month of 2021.

The drop in cement dispatch sales also marks a preview for what could be the dynamism of the construction activity, one of the sectors most affected by the recession.

It should be recalled that the ISAC construction index, prepared by INDEC, fell by 2.3% in August, 2.8% in September, 3% in October, and 0.5% in November.

Far from any reactivation, the activity shows signs of evident exhaustion.

The consulting firm Orlando Ferreres & Asociados also concludes that manufacturing activity would have fallen in December and projects a variation of -0.3% compared to the previous month according to the seasonally adjusted series of the indicator.

For OJF, the most significant year-on-year declines in December were observed in food production (-3.5%), machinery and equipment manufacturing (-4.5%), and non-metallic minerals production (-10.4%).

Considering all sectors, industrial activity was a 1.3% year-on-year drop.

The case of food production was particularly dramatic; not only did it fall in December and the 12-month accumulated period, but it also failed to grow due to the effect of the statistical drag against 2021.

This sector registered a fall of 3.3% between January and December 2022, the most significant negative variation among all the sectors surveyed by the consultant.

The shortage of foreign currency at the official exchange rate (a cost generated by the exchange rate hedge) forces the Government and the BCRA to impose strict controls on imports, which proved to be the Achilles’ heel for the sustainability of economic growth.

This scheme is exhausted, and the Argentine economy can no longer overcome the self-imposed “external restriction”.

With information from Derecha Diario