Fynsa
The Central Bank reported that the economy grew 1.0% in July compared to the same period last year, which was within expectations.which was within expectations. This variation becomes the lowest since February 2021 and, with a high probability, it will be the last positive growth data we will see in this cycle. This has several causes, which I will try to explain in the following lines.
First of all, it is no surprise to anyone (or at least, it should not be) that activity is in a process of significant deceleration, transversal to all sectors. This is clearly evident when we analyze the variation with respect to the previous month, eliminating seasonal effects. This series fell by 1.1%.Although this is not the first decrease we have seen, it is the highest since May 2020, when we experienced one of the most critical moments of the confinement measures as a result of the pandemic. I mention this so that those unfamiliar with the orders of magnitude of these variations will be able to magnify the relevance of these results. If we were once struck by the resilience of some sectors of the economy, we are now surprised by how quickly they have worsened.
The above brings us to our second point, the sectors. Trade and Services, those that accounted for much of the boom and overheating of our economy in 2021, lead the negative incidences in the seasonally adjusted analysis. Although year-on-year it seems that Services is still experiencing a positive momentum, the truth is that this is only explained by the (still) low base of comparison, which is already experiencing its last days. Or months. This seems extremely relevant to us, because the rest of the sectors did not experience an expansion of this magnitude in the recent past, and the fundamentals do not seem to predict that this will change in the future. In this way, the activity is left without growth engines..
Finally, probably the least attractive, is something I mentioned about Services, but which for the rest of the sectors is already a reality. The comparison becomes extremely demanding and this will have an impact on the year-on-year variations in the coming months. Thus, with low (but never zero) probabilities of error, we forecast that July would have been the last positive growth figure and that, from August onwards, we will be accompanied by year-on-year falls when the Central Bank publishes the Imacec figures. This effect will not only impact August, or September, but possibly into the third quarter of next year.
Undoubtedly, the scenario faces significant uncertainty, not only due to local factors, but also to external ones, especially those derived from the deceleration process that developed countries are also experiencing and the rate increases they are carrying out to combat inflation. However, we do not believe that this will generate dichotomous scenarios for the GDP data that we will know in the future, or at least not until well into next year. As Friedman said there are no free lunches, and boy, are we getting an expensive bill for this one.
