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Argentina February data shows economy flourishing

By: Hilary Burke
03.23.2011

Argentina's February trade surplus beat market expectations and industrial output rose sharply again, the government said on Wednesday, showing Latin America's No. 3 economy is still growing strong.

Argentina's economy expanded at a quick 9.2 percent last year, driven by robust consumer spending, lucrative grains exports and industrial production.

Imports had been growing at double the rate of exports in recent months due to avid domestic demand and the local currency's appreciation against the dollar in real terms -- cutting into the government's cherished trade surplus.

But February's trade surplus bucked the trend, widening 0.7 percent from a year earlier to $608 million.

This was well above the median forecast of $310 million given in a Reuters poll of 12 analysts and marked a significant improvement over January, when the surplus shrank 58 percent year-on-year, and December's 80 percent plunge.

In February, exports grew 33 percent from the same month last year, compared with 22 percent in January. Import growth slowed to 39 percent from 52 percent in January.

"The increase in exports is due to three factors: the good grains harvest, excellent commodities prices and strong demand from Brazil" for Argentina's industrial goods, said Ramiro Castineira, an analyst at Econometrica consultancy.

He noted that higher prices for Argentine goods explained a good part of the increase in exports, while imports were generally sustained by greater volumes.

Argentina's center-left government is working to protect local industry and the trade surplus. Officials expanded import permits this month to cover 50 percent more goods, sparking complaints from trading partners.

The trade surplus is one of the centerpieces of the current economic model, allowing the government to accumulate foreign currency reserves, which it uses to pay off debt.

INDUSTRY

Industrial production rose 1.4 percent in February from January, according to the government's seasonally adjusted data, driven by textiles and basic metals.

In year-on-year terms, factory output rose 9.0 percent in February, matching the number announced earlier this week by President Cristina Fernandez.

The non-seasonally adjusted figure fell slightly short of market expectations, however, with a Reuters poll of six analysts giving a 9.3 percent median forecast.

The pace of growth also cooled in February after hitting double digits from November through January. January and February tend to be slower months for industry due to vacation during the Southern Hemisphere's summer and planned maintenance at plants.

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