I. Production Indicators
The growth challenge ...
Milei's government faces the main challenge of reactivating Argentina's economy and reducing inflation (go to our Currency Monitor).
The country's aggregate production has been stagnant over the last decade, with virtually no growth, which has resulted in a drop in GDP per capita.
Moreover, part of the stabilization program involves rolling back price controls (on the dollar, fuel, private medicine, specific foods and beverages, electricity, water, and transportation rates), all of which might have a negative short-term impact on demand and production. Thus, it is expected that we will see a short-term contraction in the production of the different sectors of the economy.
At the same time, we would expect to see a rebound in activity, as the cost of stabilization "is being beared," the driving forces of private investment begin to appear, and this starts to reignite production.
Manufacturing Industrial Production Index (IPI)
The Industrial Production Index (IPI) for Argentina measures the economic activity recorded in the country's industrial and manufacturing sector.
It is probably the leading economic activity indicator that best correlates with other broader economic activity indicators such as the GDP.
GDP data is published with a considerable lag, while IPI data is highly timely (released monthly) and published with just over a month's delay (versus almost three months ore more in the case of the GDP).
Monthly Estimate of Economic Activity (EMAE)
The Monthly Estimate of Economic Activity (EMAE) is a leading indicator of economic activity that is broader than the IPI, as it includes additional sectors of the economy.
Its disadvantage is that it takes slightly longer to be published, so it gives us more complete information than the IPI, but somewhat less relevant for decision-making and monitoring Argentina's current economic activity.
Utilization of Installed Capacity
The utilization of installed capacity indicates the degree to which the economy's production capacity is operational.
An economy in recession typically sees a drop in the degree of utilization of installed capacity (as a situation prior to the microeconomic adjustment of productive capacity).
An economy in expansion typically sees an increase in the degree of utilization of installed capacity (and also its growth through new accumulation of investment in capital goods).
Export Volume
The volume of exports is another indicator of economic activity that tracks the evolution of economic activities aimed at supplying goods and services to international markets.
The indicator excludes the price effect of exports to give a more accurate picture of the real economy's performance. A strong export sector often correlates well with increases in the country's overall economic activity.
Volume of Capital Goods Imports
The volume of capital goods imports is a leading indicator of economic activity that informs us of the increase in the future productive capacity of the economy.
An increase in well-invested capital goods in an economy is one of the success recipes for future economic growth.
Balance of Trade
The trade balance is, in a majority of countries, in terms of size, the most important line item of the Balance of Payments (POB).
The trade balance is the value of all exports minus (-) the value of all imports. When the balance is positive, the inflow of foreign currency through exports surpasses the outflow of foreign curency to pay for imports.
As such, a positive trade balance generally produces a net creditor nation (or, at least, allows for the repayment of past debts caused by past deficit spending). In other words, a trade surplus usually improves the financial position of a country.
Synthetic Indicator of Construction Activity (ISAC)
The Synthetic Indicator of Construction Activity (ISAC) informs us about the progress of activity in the construction sector and sectors related to it.
Construction is a procyclical industry, which usually expands more than the economy in expansionary periods and contracts more than the rest of the economy in recessive periods.
Construction activity is highly influenced by government projects, making it necessary to disaggregate this indicator into the private and public sector (please view our next indicator).
II. Advanced Activity Indicators
Monthly Cement Dispatches
Argentina's monthly dispatches of cement is a leading indicator of construction activity.
Construction is one of the most pro-cyclical sectors of an economy.
Therefore, cement dispatches are one of the key indicators when it comes to anticipating whether an economy is entering a recession or healthy and recovering.
Railway Freight
The movement of goods is a broad leading indicator of economic activity. Freight transported by rail can be considered as a proxy for demand for intermediate goods in a variety of sectors, from agriculture to industry and commerce.
Therefore, the increase (decline) in the volume of cargo transported reliably precedes economic activity in the near future.
III. Expectations
Expectations in the Construction Sector
The construction sector expectations (ISAC) are derived from a survey conducted among firms in the construction sector.
This indicator provides information on whether the companies themselves expect an increase, maintenance, or decline in public and private construction projects
Expectations in the Industrial Sector
Similarly to the previous indicator, the expectations of the industrial construction sector (ISAC) are derived from a survey conducted among companies in the sector.
This indicator provides information on whether the companies themselves expect an increase, maintenance, or decline in the demand for their products, disaggregated by domestic demand and demand for export.