Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
January 24, 2025 –
“The latest retail sales data in Argentina paint a complex picture, where nominal growth faces the harsh reality of persistent inflation. While nominal figures show a robust 138.7% year-on-year increase in November, a deeper analysis reveals a real contraction of 7.6% and a cumulative decline of 11.9%. This dichotomy underscores the challenges Argentina’s economy faces in its quest for a sustainable recovery.
The stark contrast between nominal growth and real contraction in consumption highlights the need to continue addressing inflationary pressures as a critical factor for genuine economic recovery.
Nominal growth is primarily driven by essential goods such as cleaning products and dairy, indicating a clear consumer prioritization of basic needs amid the ongoing erosion of purchasing power. This consumer behavior, while understandable, limits the expansion of other sectors and restricts broader economic growth potential.The prioritization of spending on essential goods reflects the continuous pressure on household budgets, a factor that must be closely monitored to assess the true health of the economy.
Despite these challenges, there are positive signs suggesting some resilience. The Leading Indicator (LI) shows a monthly growth of 2.45%, while the Monthly Economic Activity Estimator (EMAE) records its seventh consecutive month of expansion, with an increase of 0.21%.
Furthermore, the Diffusion Index, which reached 80% in December, signals improvements in key economic components and lowers the likelihood of a recession to 6.9%.
While these positive indicators offer a breather, they should not obscure the underlying structural problems that need to be addressed to ensure long-term sustainable growth.Data from INDEC also reveal that, at constant prices, retail sales increased by 3.8% year-on-year in November, reversing the 7.8% contraction from the previous month. Among the categories, Leisure and Recreation, Food and Restaurants, and Electronics and Computers showed the highest nominal increases. However, when adjusted for inflation, the picture becomes more nuanced, reinforcing the need for a cautious approach.
In conclusion, Argentina’s economy is at a crossroads. While there are green shoots of recovery, persistent inflation remains a significant hurdle. The year 2024 showed considerable improvement in inflation, but much remains to be done to reach sustainable levels. To achieve solid and lasting economic growth, it is crucial to address structural challenges and control inflationary pressures.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone