In the Battle of Heraclea (280 BC) and Asculus (279 BC), the Greek King Pyrrhus of Epirus faced the Roman legions, in the so-called Pyrrhic Wars, which would determine Roman dominance in the Mediterranean region. In both battles, beyond the final result of the war, King Pyrrhus was victorious, although with a considerable number of casualties. This is the origin of the locution "Pyrrhic victory", which refers to a victory achieved at such a cost that it seems to be unfavorable to the supposedly victorious side.

The Central Bank published the Imacec for May, a month that included an additional working day, which increased 18.1% compared to the same period of 2020. This is the largest variation since the indicator is published as we know it, which was celebrated by economic and political authorities and the market. It seems that the negative effects of the pandemic on activity are being left behind and recovery is imminent. Right?

Not so much with pleasure (although perhaps some friends will disagree), I have to be the killjoy. It is true that the annual growth of the Imacec represented a historical record. It is also true that companies and individuals have been able to adapt to the pandemic that unfortunately still strikes the planet. It cannot be ignored that activity, in seasonally adjusted terms, increased 2.6% with respect to April, cutting two months of consecutive falls and being the most important advance since September last year. All of this is intrinsically good news. 

However, the historical record is largely explained by the very low base of comparison represented by May 2020, which, together with June, were the worst performing months of 2020, coinciding with the most stringent containment measures. The adaptation of companies and individuals has not been homogeneous, since although certain economic sectors have already surpassed pre-pandemic levels, some continue to be tremendously affected and even with permanent scars. The employment figures reveal this very clearly, since, although May was a month of fewer restrictions on movement, jobs were once again destroyed, people left the labor force and all the participation indicators worsened. A rather key sign in this regard is that, while Retail Trade Sales show a cumulative seasonally adjusted growth of 46.1% since March 2020, the trade sector has been the one that has destroyed the most jobs in the same period, with 190 thousand fewer jobs. 

Regarding having recovered pre-pandemic levels, let's go a bit further: the economy is still 1% below what it reached in August 2019 (the highest level before...) and 4% below what it potentially could have been, in a conservative scenario, had there been neither social crisis nor covid-19. Taking a longer look and allowing us to remove the comparison base effect, the rolling GDP for the last 12 months came in at -0.92%. And we insist, May was a good month in terms of deconfinement (in fact, that is why we were so surprised by the bad employment data), which we know was not repeated in June. 

Make no mistake, I like to celebrate when good things happen. But as Pyrrhus said after winning at Heraclea and Asculus "Another victory like this and I'll go home alone".

Nathan Pincheira 

Chief Economist of Fynsa