The best performing sector of the economy this year is construction. Its output in the first half of this year was 36% above the same period of 2002. Manufacturing is 18% ahead, while public services are 4.6% up on the same period of 2002. The desperate state of domestic demand is clear from the appalling figures for supermarket turnover: in the first half of this year, supermarket sales were 20% down on the first half of 2002.
There are indications, however, that domestic demand may be about to turn up. In July, wholesale price inflation was positive again, after four months in which wholesale prices had fallen. This indicates that some businesses feel that they will not be undercut if they nudge up prices. Even so, since the beginning of the year the wholesale price index is down by 2.5%. By contrast, retail prices are up by 2.5% over the same period, despite the continuing freeze on utility prices. Another sign of reviving domestic demand is the 67% year-on-year increase in imports in June.
Overall, Argentina's industrial production increased by 1.5% in July against June. This was the first month-on-month rise since March. The official statistics agency, Indec, claimed that a recovery in internal demand lay behind July's rally. The food industry sector was particularly strong, growing 9.1% against June and 3.6% year-on-year. This has a knock-on effect on production in other sectors such as plastic and glass.
The strength of the recovery in construction led to increased output of cement (up 19.3% month-on-month). In the first seven months of the year, cement production was 30% higher than in the comparable period of 2002. Glass output is 21% higher, and the production of other construction materials is 26% higher.
Agribusinesses appear to be missing out. Potentially key export industries such as dairying are still contracting (down 13% on 2002). Even beef production is still falling (down 2% on 2002). The only booming agribusinesses are soya and oil seeds (up 16%) and sugar (up 10%).
Even the fast-recovering textile industry still has blindspots: the once all-conquering man-made fibres sector is still contracting (down 9% in the first seven months of 2003 on the same period of 2002). This compares will thread and cloth output, which are up by 83% and 128%, respectively. There must be some doubt as to whether the industry can continue to expand at this rate: in the past few months there has been a notable pick-up in imports from Brazil. As a result, from June, the textile industry started to scale back production. The synthetic fibre industry says that it is under pressure from Asian producers, so it will not be able to push through any price increases in the near future.
Heavy industry, such as car manufacturing is having a rough time. Demand from the two main export markets, Brazil and Mexico, is falling. After a decent performance in the first half of the year, the industry's performance is beginning to tail off: over the first seven months, output was only 5% up on the same period of 2002. In July, output thumped down 8.8% on June.
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