Peru's economy grew in June, but the pace fell short of expectations. The national statistics institute, known as INEI, reported that the monthly economic activity index, a proxy for GDP, rose 1.75% compared with June 2023. That was below the average forecast among economists surveyed by Bloomberg.
The data points to a slowdown that was sharper than anticipated, with weather and international trade conditions affecting key industries.
The weakest areas in June were fishing and agriculture, where output declined sharply. El Niño, the climate phenomenon that warms Pacific waters, is driving much of the disruption. It has been affecting Peru's fishing fleet and agricultural operations, and some forecasts expect conditions to become stronger in the coming months.
This matters for a country heavily reliant on exports. Peru ranks among the largest copper and gold exporters, serves as a major supplier of blueberries and grapes, and is a top global producer of fishmeal.
Peru's export concentration means any sustained weakness in these sectors can spill into government revenue and trade balances, making the monthly index an important gauge for policy makers and market participants. The government projects that the economy could grow 3.5% or 4% this year, supported by healthy global demand for the country's commodities and solid investment levels. Reaching that goal would require a stronger second half of 2024 than the first. El Niño remains a central risk to those calculations.
Peru's central bank kept its benchmark rate unchanged at 4.25% on Thursday for an 11th consecutive month. Officials described the recent increase in price pressures as temporary, while also pointing to El Niño and the conflict in the Middle East as risks.
That is a careful positioning stance, not a dramatic shift. The central bank seems reluctant to move rates quickly in either direction.
Lima's labor market remains steadier. The capital recorded a 4.7% jobless rate for July, easing from 4.9% a month earlier.
For investors, the June data matters less in isolation than as a signal about supply conditions. Peru benefits from significantly higher global metals prices, and as a key copper and gold producer, it continues to ride strong international appetite for commodities.
El Niño is the unpredictable factor. If it continues to disrupt fishing and agriculture, it could put more upward pressure on prices for those products and keep broader growth from meeting forecasts.
The next several months will show whether El Niño strengthens. If it does, weakness in the primary sectors could begin to affect supply chains more widely.
Peru's size is enough to influence global trade flows of copper, gold, fishmeal, and fruits. When supply tightens, prices tend to respond, which is the key reason investors are watching the monthly activity data closely.