Fynsa
Have you heard that saying that often, when you can’t find the right words, it’s better to use a quote because someone else said it better than you? Well, a corollary to that might be the lyrics of some songs, which better express what you want to say but for which you lack the wisdom to find the right words. That happened to me yesterday with “To Zion” by Lauryn Hill, from the album “The Miseducation of Lauryn Hill”. I was talking with Carolina, my wife, and we agreed that the lyrics perfectly capture what being a dad means to me. A more modern take on the same idea—and forgive me, “older folks”—might be the use of memes. I think that to express my reaction to the second-quarter National Accounts data, there’s no better image than that of Rafita from *The Simpsons* saying, “I’m happy and angry.” Or the one with “Hide the pain, Harold.”
Of course, because a 5.4% increase compared to the same period last year is significant, especially since economic activity had already grown 18.9% year-over-year during the second quarter of 2021, unlike previous figures, which were compared to the most difficult period of the health crisis and its effects on the economy. Additionally, if we exclude the volatile mining sector, GDP would have increased by 7.0% year-over-year. From the perspective of spending, domestic demand grew by 8.7%, driven by both consumption (7.4% year-over-year) and investment (7.3% year-over-year). Yes. Believe it or not, investment increased year-over-year, with a 4.7% rise in the construction component and an 11.5% rise in the machinery and equipment component, in addition to an accumulation of inventories that reached 1.9% of GDP over the past twelve months. So I’m happy.
However, from a trend perspective, the assessment is not quite as positive. First, the data was disappointing, as it could be inferred from the quarterly Imacec figures that economic activity had grown by 5.7%, a figure that was revised downward by 0.3 percentage points. To be fair, though, the first-quarter growth rate was revised upward, from 7.2% to 7.4%. But that’s not what concerns me most. The negative aspect is that all components of domestic demand fell compared to the previous period, in seasonally adjusted terms. For example, consumption shows its first quarter-over-quarter decline since the second quarter of 2020, with significant drops, such as the 9.5% quarter-over-quarter decline in durable goods or the 3.6% quarter-over-quarter decline in non-durable goods. Investment, for its part, has now posted two consecutive quarters of quarter-over-quarter declines, this time by 1.0%. So I’m angry.
The truth is that, beyond this ambiguous analysis, the figures only confirm what we expected: the economy is slowing down, will continue to do so, and, at least in the medium term, there are no signs of growth in the coming quarters.
Although it is only a statistical measure, based on the revised data, there would indeed have been a technical recession during that period—by a hair’s breadth. But what is currently a technical measure that only economists pay attention to will become much more evident in the coming quarters, with outright year-over-year declines in the second half of the year and throughout most of 2023. By then, it will be hard to hide the pain, Harold.
