registers strong surge at the end of third quarter
economy remains poised to live up to its growth potential this year.
In September, the economy expanded 7.7% compared to the same month last
year, according to the monthly indicator for economic activity (IMACEC,
Indicador Mensual de Actividad Económica). The result was well
above last month’s Consensus Forecast, which had the economy growing by
6.1% and was virtually unchanged compared to the growth rate observed in
August (+7.4% year-on-year). A month-on-month comparison
corroborates the continued robustness suggested by the annual figure.
According to seasonally adjusted data, the economy expanded 1.1% over the
preceding month, twice the pace observed in August. As a result of
the strong reading, the annual average growth rate inched upwards another
notch from 4.7% in August to 4.9% in September, the eighth consecutive
increase that confirms the consolidation of the higher growth trend
observed in the past months. According to the preliminary data set,
third quarter growth came in at 6.5%. Detailed third quarter data
for national accounts will be released on 23 November.
sector accelerates at fastest pace in more than ten years
The boost registered at the end of the third quarter was particularly
pronounced in the industrial sector. In September, industrial
production increased 12.0% over the same month last year, which was even
above the very robust 9.0% growth observed in August. The September
reading marked the fastest pace observed since 1992, not least since the
recent adjustment in the base year from 1989 to 2002 results in higher
growth rates. In addition, the strong growth is partly due to an
extra day worked in September this year compared to September 2003.
Nevertheless, the annual average growth rate advanced from 5.8% in August
to 6.3% in September, consistent with the accelerating trend observed over
the past months. The improvement over August was due to much higher
non-durable consumer goods growth and slightly faster growth in
intermediate goods output. Durable consumer goods and capital goods,
in contrast, deteriorated compared to August and actually contracted over
the same month last year.
shows incipient signs of recovery
The resilient development in industrial production and the economy as a
whole once again stood out against a rather dismal development in
employment. In the third quarter, unemployment reached 9.7%, 0.3
percentage points above the rate registered in the same period last year
and disappointingly close to the 10%-threshold. That said,
unemployment is showing incipient signs of improvement. For the
first time this year, the unemployment rate dropped over the preceding
month. In the third quarter, unemployment was 0.2 percentage points
below the rate observed in the moving quarter up to August. Moreover,
the drop in the unemployment rate reflects an increasing number of jobs
generated, which jumped from a low of 24,000 in the quarter up to July to
107,000 in the third quarter. In the coming months, seasonal hiring
will kick in and will help to further reduce the unemployment rate.
Consensus Forecast panellists expect unemployment to drop to 8.1% by the
end of the year, which would be half a percentage point above last year.
lifted amid better than expected development in the third quarter
The better-than-expected third quarter reading has prompted Consensus
Forecast panellists to raise their forecasts yet again despite
persistently high unemployment. Consensus Forecast participants
expect that the economy will lose some steam in the final quarter but
still anticipate robust 5.3% growth. For the full year, Consensus
Forecast participants have lifted their already optimistic 5.0% forecast
from last month to the current 5.1%. In 2005, the economy is
anticipated to keep up the pace, with growth expected at 4.8%, which is a
notch below last month’s forecast. The current Consensus is thus
in the centre of the latest Central Bank forecast of 4.5% to 5.5%.