Argentina's Economy Shrinks For First Time In Two Years

The numbers that matter

Argentina's output fell 0.6% in the April to June quarter compared with the prior three months, breaking a two year streak without a quarterly decline. That was not as weak as the -0.9% median forecast from Bloomberg's analyst survey. Compared with the same quarter a year earlier, activity was up 2.0%, the statistics office reported Thursday.

What drove the move

Trade was the lone bright spot. Stronger exports, paired with fewer imports, propped up the headline figure. By contrast, government spending, household consumption and investment all fell during the quarter.

Jobs and sector splits

The unemployment rate nudged up to 7.9%. In an August AtlasIntel poll, joblessness ranked as the country's top economic concern. A stronger peso in real terms and more exposure to global competition have weighed on manufacturing, retail and construction - Argentina's three largest employers - leading to job losses. Meanwhile, energy, mining and agriculture are racking up export records, but those sectors hire far fewer people.

Policy, forecasts and what to watch

President Javier Milei's push to rein in inflation and erase long running deficits comes alongside tight currency management that allows the peso to strengthen after inflation and a pivot toward more open trade. On Tuesday, the government trimmed its 2026 GDP projection to 3% from 5% in the budget proposal sent to Congress. Private economists polled monthly by the central bank now expect annual growth to finish this year at 2.1%, down from a 3.5% call last December. Early third quarter reads are not improving the picture: construction and manufacturing both dropped sharply in July, and August tax revenue was flat after inflation.

What Bloomberg Economics says: "Argentina's GDP report confirmed a weak second quarter, but revealed little to help gauge growth ahead. Given strength in primary sectors and little signs of broader growth, we expect economic performance to remain decent, though unspectacular in coming quarters. That's unlikely to raise alarms for the fiscal or political outlook. It also doesn't augur smooth sailing toward reelection for President Javier Milei in 2027." said Jimena Zuniga, Argentina Economist.

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For your wallet, the split is straightforward: export heavy primary industries have momentum, while worker dense sectors look soft. If that mix holds and the broader rebound stays tepid, it could take longer for everyday demand to feel lively again.

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