Argentina's Economy Contracted 2.2% on Year in February--Update

By Taos Turner Features Dow Jones Newswires

Argentina's economy contracted 2.2% on the year in February, indicating that the country's widely expected fiscal recovery may end up being slower than anticipated this year.

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The economy also shrank 1.9% from the previous month, the national statistics agency reported Tuesday. The data come after Argentina's economy grew 1.4% on the year in January.

"The recovery is coming along slower than anticipated," said Fausto Spotorno, chief economist at Orlando J. Ferreres & Asociados, an economic research firm.

OJF recently lowered its growth forecast for 2017 to 3% from 3.5%, citing weaker-than-expected industrial output. But Mr. Spotorno says the economy returned to growth in March and that February's data doesn't indicate that the economy is heading back into recession.

One reason economic activity suffered in February was because consumer spending declined sharply, hit by a government decision to change the way banks and retailers allowed consumers to finance purchases in multiple installments, Mr. Spotorno said. Such payment programs, which allowed customers to defer payments for many months or even years, had become hugely popular over the past decade and were key to rising consumption levels in recent years.

In March, the economy began benefiting measurably from increased investment in three sectors: agriculture, energy and construction. Government investment in roads, bridges, airports and highways is ramping up quickly, boosting economic activity across the country.

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"February was a bad month but we knew it would be bad. Things rebounded in March and that's what people should be looking at now," Mr. Spotorno said.

Write to Taos Turner at taos.turner@wsj.com

BUENOS AIRES -- Argentina's economy contracted 2.2% on the year in February, indicating that the country's widely expected fiscal recovery may end up being slower than anticipated this year.

The economy also shrank 1.9% from the previous month, the national statistics agency reported Tuesday. The data come after Argentina's economy grew 1.4% on the year in January.

"The recovery is coming along slower than anticipated," said Fausto Spotorno, chief economist at Orlando J. Ferreres & Asociados, an economic research firm.

OJF recently lowered its growth forecast for 2017 to 3% from 3.5%, citing weaker-than-expected industrial output. But Mr. Spotorno says the economy returned to growth in March and that February's data doesn't indicate that the economy is heading back into recession.

One reason economic activity suffered in February was because consumer spending declined sharply, hit by a government decision to change the way banks and retailers allowed consumers to finance purchases in multiple installments, Mr. Spotorno said. Such payment programs, which allowed customers to defer payments for many months or even years, had become hugely popular over the past decade and were key to rising consumption levels in recent years.

In March, the economy began benefiting measurably from increased investment in three sectors: agriculture, energy and construction. Government investment in roads, bridges, airports and highways is ramping up quickly, boosting economic activity across the country.

In another sign that activity may be picking up, Torcuato Di Tella University reported Tuesday that consumer confidence surged 12.8% from a month ago.

Notably, confidence is up the most among lower-income Argentines, some of whom have been the hardest hit by double-digit inflation and rising utility rates. Argentines also reported feeling more confident about their personal economic situation and that of the country, according to the university. Additionally, more people also said they plan to buy durable goods in the months ahead, an indicator that retail sales could rise.

"February was a bad month but we knew it would be bad. Things rebounded in March and that's what people should be looking at now," Mr. Spotorno said.

Write to Taos Turner at taos.turner@wsj.com

(END) Dow Jones Newswires

April 25, 2017 18:51 ET (22:51 GMT)