Editorial: Emission, the Great Danger for the Second Semester
Argentina is heading towards a primary deficit which, being conservative, will reach 5.5% of GDP but could be higher, depending on factors such as assistance to the private sector through relief programs for the pandemic effect. It will also depend on how much subsidies on energy grow and whether pensions and public wages lose their value due to inflation.
Undoubtedly, a good part or all of the financing of this deficit will come from the Central Bank, either through greater distribution of profits to the Treasury, or through temporary advances. In plain terms: monetary issuance. So far this year, the BCRA has transferred 312 billion in zero-rate loans and 940 billion in dividends to the Treasury.
However, so far the monetary base has grown much less than the assistance to the Treasury: 240 billion pesos. This is an almost 60% nominal growth compared to the previous year. Part of this growth is explained by a very low comparison basis given the monetary tightening of the first half of 2019. During 2020, the BCRA sterilized over 1 trillion pesos as a result of increasing the stock of Leliqs by 888 billion and the stock of repos by 267 billion. This clearly spells out that the CB understands the danger of an excess supply of pesos in the economy.
Another trillion pesos (at least) will have to be issued during the second semester in order to pay for the expected deficit. The first problem will be testing the limits of the CB’s charter for monetary financing. The greater the inflation, the higher the limit. The second problem will be the growth of interest-bearing liabilities and their effect on the CB’s balance sheet. In this first half of the year, almost 300 billion was spent in interest.
The other big problem is that even though the base is not growing out of control, the private M2 has grown over 100% during the last year. There are many sight deposits that are neither going to dollars nor to transactions because the pandemic reduces the speed at which they flow, while the ever tighter cepo lowers the amount of people who can make MEP and blue chip swap operations, since importers and firms who receive the Government’s assistance have been practically left out of the game.
The CB and the Government seem to be placing their bets on the money demand growing once the economy goes back to normal. Undoubtedly, that could be the case. But the level of M2 as a percentage of GDP is quite higher than its historical average. According to our estimations, the M2 has an “extra” 2.5/3 points of GDP. it is around 11.8% against its 8.8% historical average. if we compare it to a year like 2014, the excess of M2 is similar. Considering that the tight FX controls can contain some pesos demand, and lowering the excess of demand to 2.5 points, we get a monetary “excess” of 700 billion pesos.
Those pesos could go looking for the market of goods or the dollars, but in both cases the consequences would be inflationary. Our projections for the second half of the year imply that inflation will double the one from the first half. Inflation “solves” the nominality problem since GDP grows and the M2 adjusts to its historical values.
Another option is to continue sterilizing, for which more interest rate will be needed. Will the CB be willing to take the path it used to criticize, creating a “Leliq snowball” that will increase the quasi-fiscal deficit?
What should not happen is them taking the path of solutions such as “reinventing the wheel” by increasing rates for savers without increasing the monetary policy rate, because that would leave no margin for banks. There also does not seem to be more room to lower reserve requirements to compensate the margin for banks. The multiplier will probably not be very high, despite that the cepo tends to increase it. The credit demand of subjects with good balances will hardly be abundant during the following months.
What’s coming up next week…
- Today INDEC released the balance of payments of the first quarter, exhibiting a current account deficit considerably lower than the USD 3.5 billion from Q1-2019. Next week we will study these numbers in detail
- On Thursday, the Ministry of Economy will spread June’s revenue figures. We expect a nominal rise around 15%, in line with previous months.
- On Wednesday and Thursday, the registration figures for new cars and motorcycles will be revealed. We expect relatively good numbers since the FX spread lowered the price of these goods measured in parallel dollars.
The CB Relaxed the “Cepo” for Some Imports
- Through Communication “A” 7052, the CB announced it will allow to pay for imports at the port of origin starting on July 1
- Anyhow, the outstanding amounts must be similar to the ones made since September 2019 and cannot surpass the equivalent of USD 1 million, including the amount for which access to the FX market is requested
- Said amount will rise to USD 3 million when importing medicine and goods linked to healthcare
- This relaxation adds to the one from some weeks ago, when access to the FX market was made easier for SMBs and for the purchase of fertilizers and medical supplies
During their last board meeting, the Central Bank decided to relax access to the FX market for importing. Through Communication “A” 7052, the monetary entity announced that it will allow to pay for imports at their port of origin starting on July 1. This means that imports that are in the boarding port after that date, or that they have been previously boarded but have not entered the country, can be paid for accessing the FX market, that is, at the official exchange rate.
Anyhow, the outstanding amount must be similar to payments made after September 2019 and must not be over the equivalent of USD 1 million, including the amount for which the access to the FX market is requested. Said amount will rise to USD 3 million when importing medications and medical supplies.
This regulation makes it easier for some business to get access to dollars on the margin, given that, according to the previous regulation, the access to the FX market was conditioned to the level of indebtedness on trade obligations in effect as of January 1. Through that regulation, the businesses which had paid for obligations in advance (in fear of future depreciation) were left out of the FX market.
The current regulation adds to the slight relaxation of the cepo some weeks ago, in which SMBs importing up to USD 1 million gained access to the FX market, as well as allowing importers to access the FX market to pay for fertilizer and medicine imports. Also, there was more tolerance to dollar holdings, so those under USD 100,000 need not be used before accessing the FX market.
Greater relative simplicity to pay for imports at the official exchange rate helps lower the pressure on the price of imported goods that arose from forcing importers to use their own dollar holdings. The cost of opportunity is equal to the free dollar, causing a potential increase in the price of imported items. Anyway, the current regulation does not reach the whole spectrum of imports, so said pressure still exists.
April’s Slump Was Even Worse Than in 2001 Crisis
- EMAE-INDEC plummeted 17.5% compared to March’s level, recording its greatest monthly fall in the historical series
- In y/y terms, the official indicator recorded a 26.4% fall, the greatest on INDEC’s record
- The 15 sectors surveyed by INDEC fell in y/y terms in April and only two of them did not fall at a two-digit rate: financial intermediation and public services
- During the first four months of the year, EMAE fell 11.0% compared to the same period in 2019; we expect it to fall around 12% during the entire year
The economy would have hit its floor in April: a very low floor, similar to the levels from November 2004. The social isolation measures that have been in place since March to face the Coronavirus deepened the recession that economic activity had already been recording and made it record the greatest y/y and monthly falls on INDEC’s record, even greater than the ones recorded during the worst part of the 2001 crisis.
In this scenario, EMAE-INDEC slumped 17.5% in April compared to March’s record ─seasonally adjusted series─, accumulating six consecutive months without growing in monthly terms. This way, the official indicator displayed its greatest monthly rise in the official series starting in 2004, and even greater than every fall recorded by the previous series, which started in 1993.
In y/y terms, the official indicator slumped 26.4%, accumulating its ninth consecutive fall in April, the greatest one recorded by INDEC even if we take the current series as well as the one starting in the nineties. That means that April’s fall was even worse than the ones recorded during the worst part of the 2001 crisis, which hit negative records around 16.5%.
For the first time since the beginning of the series in 2004, the fifteen sectors of activity surveyed by the official indicator have displayed y/y drops, and only two of them did not fall at a two-digit rate: financial intermediation (3.2%) and the production of electricity, gas, and water (-8.3%). The branches that had the greatest negative effect in EMAE’s y/y variation were the “Manufacturing Industry,” which went down 34.4% with a -5.07 p.p. effect, “Construction,” with an 86.4% fall and a 2.54 p.p. negative effect, and “Wholesale and Retail Trade and Repairs,” with a 27.0% fall and a -3.01 p.p. effect on the general indicator. Paradoxically, one of the most affected sectors was the Healthcare sector, which fell 36% in y/y terms, given that, with the exception of treatment related to the pandemic, healthcare centers have not been having much activity. In hotels and restaurants, the ones most damaged by the lockdown, the fall has surpassed 85%.
During the first four months of the year, economic activity accumulated an 11.0% fall compared to the same period in 2019. We expect the economy to have hit its floor in April, given that May and June’s preliminary data (months with less strict measures) point out that the economy started recovering. However, with the quarantine returning to Phase 1 in the Metropolitan Area of Buenos Aires (AMBA) and with tourism restricted almost throughout the country, the economy will fall again in July, although probably much more moderately than in March and April, since the quarantine has been relaxed in most of the interior of the country.
We have recently revised and lowered our growth projections for the entire year, from -10.0% to -12.0%. This fall assumes a strong contraction around 18% q/q for the second quarter, and a second half of the year on recovery, especially during the last three months. If this fall ends up happening, it would be even greater than the one recorded in 2002 (-10.9%), and in 1989 and 1990, when the debacles were one-digit ones. However, the economy’s performance during what is left of the year will depend on how long the lockdown ends up being and on the way in which activity starts resuming throughout the different sectors.
GDP Contracted 4.8% During the First Quarter
- Economic Activity fell 4.8% during Q1-2020 compared to Q4-2019, despite including scarcely 11 days of mandatory quarantine
- Private consumption decreased 6.8% compared to the previous quarter and investment went down 9.7%, while exports dropped 13.4% and imports 7.6%
- In y/y terms, economic activity recorded a 5.4% contraction during the first quarter, with a 6.6% fall in private consumption and an 18.3% slump in investment
Despite the lockdown’s negative effects, the economy was already in a recession before March. After closing 2019 with a 2.2% fall, economic activity was far from recovering during the first two months of 2020, despite the slight improvements in some sectors. With the Coronavirus outbreak and the start of the mandatory quarantine during the second fortnight of March, every hope of recovery faded and the economy recorded widespread falls in most sectors.
In effect, GDP contracted 4.8% compared to Q4-2019 (seasonally adjusted series), recording its greatest fall since Q2-2018. After scoring a slight 0.8% drop during Q4-2019, private consumption plummeted 6.8%, sunk by the weakness in formal employment and real wages, and affected by the imposed mobility restrictions. As for private investment, it increased its y/y fall from 6.5% during Q4-2019 to 9.7%, accounting for the context of great uncertainty due to the pandemic and the decline in activity. Meanwhile, exports slumped 3.4% due to the FX spread and the operations made in advance by agricultural exporters during Q4-2019, while imports went down 7.6%, in line with the setback in activity. Only public consumption grew, about 1.6%.
In y/y terms, GDP recorded a 5.4% fall with widespread reductions in every component of demand. Particularly, investment recorded an 18.3% slump, while private consumption contracted 6.6% and public consumption shrank 0.7%. As for foreign trade, exports, which had been growing during the last three quarters, went down 4.7%. This decrease was compensated by the fall in imports (-16.0%), affected by the decline in activity.
As for supply, the agriculture, livestock, hunting, and forestry sector, the most dynamic one in 2019, dropped 6.2% compared to one year ago. In line with it, the industry fell 6.5% y/y, while construction collapsed 20.8%. As for the production of services, retail and wholesale trade shrank 6.5%, severely affected by stores closing during the last 11 days of March. Financial intermediation went down 5.9%.
Expectations for 2020 have turned gloomier due to the Coronavirus crisis and the debt renegotiation extending more than expected. In this context, we have revised our GDP forecast to a 12% drop in 2020.
Great Primary Deficit in May: 0.9% of GDP
- Total revenues of the Central Government grew scarcely 2.4% compared to the same month in 2019, while primary expenditure grew 96.8%
- Social expenditure leapt to 94.8% in y/y terms and included around ARS 80.0 billion destined to the Emergency Family Income (IFE) and the Emergency Assistance to Labor and Production (ATP) programs
- The primary deficit rose to ARS 251.2 billion during the month (0.9% of GDP), after recording a ARS 25.9 billion deficit in May 2019
- The fiscal deficit stood at ARS 308.2 billion, almost ARS 270 billion greater than the one from a year ago
Transfers to the private sector (especially IFE and ATP) and tax benefits granted to firms in order to face the economic consequences of the pandemic, together with the weaker economy (which was already on recession tracks), hand in hand with the second full month of compulsory isolation, deepened the decline of fiscal accounts in May once again. While expenditure grew again over 90% y/y, revenue barely managed to grow in nominal terms, accounting for the weakness in the economy, particularly in consumption and employment, and in foreign trade.
The non-financial public sector’s total revenues recorded a scarcely 2.4% rise compared to May 2019, and, in particular, tax revenues grew 1.6% according to the Monthly Report of Revenues and Expenditure (IMIG) spreadsheet released by the Treasury. The highlights in tax revenues were falls in VAT (-7.9%), Debits and Credits (-5.1%), export taxes (-36.2%), and import taxes (-3.0%). Conversely, the tax revenue from personal goods grew 1,191.6%, hand in hand with the collection of advances and the increase in the aliquots. As for rents on assets, their 53.7% y/y fall was mainly the result of ANSES suspending its collection of credit installments to the private sector. Meanwhile, capital revenue increased ARS 8.2 billion compared to one year ago, almost exclusively due to the extraordinary revenue from the Historical Reparation program.
As for primary expenditure, it recorded a strong 96.8% rise compared to one year ago, in line with last month’s, boosted by the set of measures laid out by the Government to uphold production and employment, guarantee the supply of essential products, and give financial aid to provinces amid the economic and sanitary emergency. Particularly, expenditure destined to the Emergency Family Income (IFE) and Emergency Assistance to Labor and Production (ATP) programs amounted to ARS 80 billion, while the Alimentar program recorded an ARS 8.5 billion y/y increase and expenditure to support jobs went up approximately ARS 2.0 billion. Also, within the sanitary emergency context, the Treasury has reported that almost ARS 12.0 billion were used to finance the Superintendency of Health and PAMI. In this scenario, social benefits grew 94.8% compared to May 2019, with the item “Other Social Programs” taking an 832.4% leap. As for retirement and other contributory pensions, they accumulated a 43.9% y/y rise, after the last increase was granted on March 1, which was 13% for the minimum pensions.
Likewise, economic subsidies grew 179.3% in y/y terms, boosted by the continuity of the tariff freeze (which has been extended until the end of the year), and the relative lag of the real exchange rate. Especially, subsidies on energy went up 210.3%, being the highest ones in real terms since December 2017.
Intended to counter the lower revenue via provincial taxes and automatic transfers from the nation to provinces, transfers to provinces grew 739.9% in y/y terms. This result was mainly explained by Contributions to the National Treasury (ANT) of almost ARS 11.0 billion, food contributions to community kitchens and sanitary contributions to provincial hospitals worth almost ARS 4.5 billion and ARS 3.8 billion in expenditure to reinforce provincial retirement funds that are not transferred to SIPA (Integrated Retirement System of Argentina), among other concepts. Given the hard falls in the taxes that make the greatest contributions to the redistributable mass (such as VAT or Income Tax), Federal automatic transfers grew scarcely 6.6% y/y in May, meaning a 25.7% real fall.
On the other hand, transfers to universities grew 42.4% compared to the record from a year ago, while operating expenses rose 27.9%, with wages growing 24.1%. Capital expenditure grew 28.7% in y/y terms, boosted by capital transfers to AYSA (which invested over ARS 6.0 billion in works) and for the construction of modular hospitals (about ARS 1.0 billion) within the sanitary emergency framework.
In this scenario, a ARS 251.2 billion primary deficit was recorded in May, equal to 0.9% of GDP. This result implies a strong decline compared to the ARS 25.9 billion surplus from April 2019, though we must consider that the scenario was very different than the current one. If we consider the ARS 56.9 billion interest payment to the private sector, the fiscal deficit rises to ARS 308.2 billion, almost ARS 270 billion higher than the one in May 2019. Thus, the primary deficit has amounted to ARS 636.1 billion so far this year (2.2% of GDP), while the fiscal deficit has been ARS 898.9 billion, exclusively financed by temporary advances and the CB’s profits.
Due to Low Imports, the Trade Surplus Grew in May
- In May, exports amounted to USD 5.1 billion, falling 16.3% y/y; imports totaled USD 3.2 billion, 31.8% less than last May
- Due to low imports, the trade surplus reached greatest record for May since 2010
- During the first five months of 2020, a USD 6.6 accumulated; imports contracted more (-23.8%) than compared to the same period in 2019
International trade contracting as a result of the Coronavirus crisis continued to reflect on May’s data, which accounted for another fall in exports in y/y terms. On the other hand, the weakness in local economic activity, worsened by the pandemic and the measures to face it, led to a new slump in imports (greater than the one in exports) and, consequently, to a high trade surplus.
Exports cut their y/y fall from 18.9% in April to 16.3% in May, explained by a similar reduction in both prices (-8.6%) and in exported volumes (-8.4%). In effect, exports totaled USD 5.1 billion during one of the months in which they get the greatest boost from the gross harvest, turning this result into the lowest one for May since 2009, amid the world financial crisis.
Among the main sectors of exports, the only one that achieved some growth was primary products, 8.3% over its level from a year ago, mainly boosted China’s soybean demand (which in fact meant 60.7% of all exports to that country during the month).
The main drop was observed in industrial manufactures, which slumped 52.7% y/y, greatly affected by the fall in sales of vehicles and their accessories mainly destined to Brazil, whose economy is still undergoing the severe impact of the sanitary crisis. Following behind were fuel exports, which deepened their y/y fall from 33.9% in April to 40% in May. It is necessary to clarify that they grew strongly in volume (81.7%), but the decrease in international oil prices made them contract in value. Finally, farming manufacture exports went down 5.5% y/y in view of the drop in sales of soy byproducts.
Affected by the contraction of economic activity, imports increased their fall in y/y terms from 30.1% in April to 31.8% in May, resulting from a 7.8% drop in prices and a 26% one in imported volumes. Thus, imports, amounted to USD 3.2 billion, their lowest record for May since 2009, just like exports.
Every item of imports fell in y/y terms. The greatest relative fall was recorded by automotive imports (-76%), which amounted to scarcely USD 62 million. Following came fuel and lubricant imports (-58.7%), spare parts and accessories for capital goods (-48.6%), capital goods (-30.6%), intermediate goods (-15.7%), and consumption goods (-8.2%).
The balance of trade with Brazil recorded a deficit for the second month in a row, amounting to USD 131 million, and was mainly explained by the exports of vehicles and their accessories plummeting. Exports to Brazil in seasonally adjusted terms improved slightly in May, but they stand at less than half their historical average. This way, China kept its position as our main trading partner.
As a result, the trade balance displayed a USD 1.9 billion surplus in May (accrual basis), its greatest record for this month since 2010. As for the surplus accumulated over the first five months of 2020, it reached USD 6.6 billion, as imports (-23.8%) sank more than exports (-11.5%) compared to the same period in 2019.
Despite the high surplus on an accrual basis, in May the trade balance obtained a scarcely USD 312 million surplus on a cash basis, according to the latest exchange report released by the CB. In contrast with the previous month, in which the difference lay mainly in the greater imports on a cash basis (due to commercial debt payments), this time it was mostly explained by lower exports collections, in view of the slump in exports pre-financing. In May 2019, they had been USD 2.4 billion, while in May 2020 they just got to USD 957 million. The FX spread, the sovereign default, and the fall in dollar deposits do not favor commercial financing.
Unemployment Rose to 10.4% During Q1-2020
- The unemployment rate, which stood at 10.1% during Q1-2019, according to the Permanent Households Survey by INDEC, reached 10.4% between January and March 2020
- The Coronavirus accelerated the fall of private employment in March, a month in which over 100,000 jobs were lost according to SIPA
During Q1-2020, national unemployment ─in the 31 urban areas surveyed by INDEC’s Permanent Households Survey─ reached 10.4%, its highest level in recent years and 0.3 percentage points over the record from the same period in 2019. The employment-to-population ratio did not record significant variations, from 47-0% at the beginning of last year to 47.1% currently, while the employment rate dropped marginally from 42.3% to 42%.
Once again, the greatest level of unemployment was concentrated in the Buenos Aires Metropolitan Area (AMBA), where it struck 11.5%, reaching 12.4% in the Greater Buenos Aires. Conversely, the Northwest and Cuyo areas are still the ones with the lowest unemployment, 5.4% and 7.2% respectively. Considering by city, the lack of jobs was alarming in the Greater Rosario, reaching 12.9% and in Tucumán-Tafí Viejo, the city with the highest unemployment rate in the country at the beginning of 2020, at 13.1%. The rest of the big urban areas were in line with the national average. According to INDEC’s report, women did better than men in the last year. Perhaps the most disturbing piece of information is that long-term unemployment grew.
The latest report from the Ministry of Labor showed a drastic drop in formal employment in March, a month in which around 105,000 private jobs were lost due to the pandemic. The most-damaged branch of employment was construction by far, with almost 18,000 less registered workers, and, given the high level of informality in the sector, the actual numbers might have been way higher. The number of salaried workers in private households went down 7,500. For trade, the industry, and the hospitality and gastronomic sector, around 4 and 5 thousand jobs were lost in each branch. In total, the negative balance for the salaried sector was 47,800 jobs. An even greater fall in the amount of monotributistas [single-system taxpayers] and autonomous workers completes the somber situation of formal employment, which will worsen with the data from Q2-2020, in which the economic halt was even greater.
Apart from Essential Trade, Sales Hit Rock-Bottom in April
- During the first full month of the quarantine, sales in supermarkets (0.2%) and wholesale stores (0.3%) were constant compared to April 2019, while shopping center sales took the brunt of it and experienced an unprecedented slump (-98.6%)
- According to CAME, May’s retail trade cut its y/y fall to 50.8% and recovered 16.2% in monthly terms
- New car sales to dealerships ─in units─, reported by ADEFA, sank 28.3% in May compared to the same month in 2019, while used car sales halved (-48.8%) compared to a year ago
Official statistics on sales point out that they might have hit rock-bottom in April, the month in which the lockdown was strictest throughout the country. INDEC has not yet provided data for May, but the surveys made by sectorial chambers account for some re-activation, though the levels are much lower than pre-Covid ones.
Sales measured in current prices increased 51.1% in supermarkets and 50.2% in wholesale stores: they did not repeat March’s sudden leap, which took place due to the hoarding of goods when the lockdown began, but despite the critical situation they managed to uphold sales levels similar to those from a year ago, since they represented 0.2% and 0.3% variations in real terms respectively. This stability matches IPI-INDEC’s data about the production of food and beverage, which remained stable throughout the toughest period of isolation.
On the other hand, in April shopping centers suffered the restrictions more than anybody: forced to turn food courts into delivery services and barred from opening doors, sales fell even in nominal terms (-97.6%) and were practically null measured in constant prices, with a record 98.6% slump. Some provinces allowed shopping centers to open again toward the end of May and by mid-June the cities of Rosario and Córdoba had already done so as well, but a reopening in AMBA seems quite distant.
Regional relaxation and opening trade for close businesses granted May’s retail sales some oxygen, according to CAME’s survey: they dropped 50.8% compared to one year ago, moderating their contraction slightly after April’s 57.6%. The seasonally adjusted data shows a 16.2% recovery during the month. Once again, the lowest falls took place in essential markets such as pharmacies (12.9%) or food and beverage (-14.8%), while, at the other end of the spectrum, we have clothing (-74.5%), furniture (-73.5%), and home appliances (-69.6%).
As for the automotive sector, ADEFA reported that, although new car sales to dealerships ─in units─ kept falling in May with a 28.3% fall compared to the same month in 2019, between April and May the amount of vehicles sold went from 7,500 to 20,000, which is more in line with pre-quarantine records and implied a 127.5% seasonally adjusted monthly rise. Used car sales measured by the CCA recorded a 48.8% y/y slump, although they reduced their fall compared to the 86.4% one recorded in April.
While the rest of the country seems to be gradually going back to normal, the sanitary situation forced AMBA to go a step back with the measures at the beginning of the second half of the year. But, even after the pandemic, private consumption will have to sort another equally complex obstacle: the deterioration of incomes. In April, real wages contracted 1.3% compared to one year ago, and many unions have agreed on temporary cuts to preserve jobs. With the intention of strengthening sales, the Government has announced the extension of the Ahora 12 installments program until the end of 2020.
In June, Consumer Confidence Grew Again After Four Months
- With a 2.7% monthly rise, UTDT’s indicator scored its first positive record since January
- Its recovery did not prevent confidence from dropping 2.7% compared to June 2019, its first y/y fall in thirteen months
At the beginning of June, the Government lifted the quarantine in most provinces and focused restrictions on AMBA, Chaco, and a handful of Southern cities. The economic reopening climate, together with some optimism regarding debt restructuring, had a positive effect on consumer confidence, which scored a 2.7% rise, its first positive record since January, when the Coronavirus was still out of the picture. This improvement did not prevent the indicator from finishing 2.7% below its record in June 2019, a month in which confidence had grown strongly due to the exchange stability and the markets’ initial enthusiasm on the so-called “Pichetto effect.” Thus, confidence fell in y/y terms for the first time since April last year.
June’s survey was made between the first and eleventh day of the month, so it did not include last Friday’s announcements in which controls were tightened for AMBA. After reaching its peak in April since Alberto Fernández took office, confidence in the Government, also surveyed by UTDT, experienced some wear due to the extension of the lockdown and fell again.
As in May, the rise in consumer confidence was strengthened by a change in the perception of the current situation, possibly linked to the opening of the economy and the economic assistance measures: for the second consecutive month, the subindex measuring present conditions recorded a surprising rise, a 12.4% variation. Said subindex even recovered 30.3% compared to one year ago. As for future expectations, they did not change much and recorded a 1.1% monthly decline, 12.7% below their level in June 2019.
Unlike what happened during previous months, this time short-term expectations were the more optimistic: hopes on the near future improved 3.6% between May and June, although they are still 33.9% below their level from the same month one year ago. Meanwhile, in view of the hard outlooks about the fall in Latin American activity and the fear of surges in developed countries, long term expectations declined 4.0% during the month, undergoing a 6.4% y/y fall.
Having hit its historical floor in April, consumption of durable goods and real estate continued its recovery and took a 40.5% leap in June, having grown 88.1% during the previous month. Despite the crisis, the subindex is 27.2% over its level one year ago: in addition to the rebound compared to the hardest month of the lockdown, the spread between the official dollar and its variants serves as an incentive to buy goods that have their prices tied to the official exchange rate.
Thus, during the first half of 2020, consumer confidence accumulated a 6.8% fall. In addition to the impact of the new restrictions in AMBA, the rise of Coronavirus cases limits the capacity to resume more activities in the interior of the country, delaying economic recovery. On the financial side, a successful debt restructuring would alleviate the uncertainty in the post-pandemic scenario.