As expected, Argentina fell into recession in Q3, for the second time in three years. After dropping by -4.2% q/q in Q2, GDP contracted by -0.7% q/q in Q3. In y/y terms, GDP declined -3.5% in Q3. The contraction in private and government consumption, investment and imports accelerated. It was partially offset by the recovery in exports thanks to competitiveness gains after the -50% currency depreciation this year. Compared to Q3 2017, private consumption was the main drag on activity (-3.0pp) followed by investment (-2.3pp) as inflation averaged +35% in Q3 and policy interest rates spiked to 65%. From the supply side, retail suffered the most (-8.9% y/y), followed by manufacturing and agriculture. The economy should continue to contract as consumer confidence remains weak and inflation close to +50%. Two positive notes could slightly mitigate the contraction: policy rates have started to decline (currently around 60%) and the Q3 unemployment rate remained close to the level in Q1 (9.0%).
