Fynsa
After a positive surprise in July, the Imacec showed another year-over-year decline in August, larger than the market had expected. The 0.9% decline contrasted with the 0.1% projected by the consensus (-0.5% y/y, according to our estimates), which was mainly driven by declines in the services and retail sectors.
Within the services sector, the Central Bank’s statement specified that the education sector had the greatest negative impact. Unfortunately, due to the way the information was presented, we do not know the specific impact of that sector, only the impact of the sector as a whole: -0.6 pp. It’s worth recalling that, for the data released for July, part of the larger-than-expected increase stemmed from a surprise in education services, for a reason that has little to do with economic growth (in my opinion): in 2023, there were fewer winter break days than in 2022, a year in which the break was extended due to the spread of various respiratory viruses. This makes sense, since it was a general policy that applied to all institutions—both public and private—for an additional week.
It has been argued that the decline in education services in August was due to the teachers’ strike, which lasted 48 hours at the beginning of the month. This does indeed have a negative impact on economic activity, as evidenced by the seasonally adjusted monthly change in the services sector (again, unfortunately presented in aggregate form rather than by specific sector) of -0.4 percentage points. To put this in context, education services account for approximately 5% of GDP (5.1% in 2018) and consist of 61% public education, while private education accounts for 39%.
Although this explanation seems plausible to us, it overlooks the economic weakness evident in all other sectors. A two-day strike, given the relative weight of the affected group, is not sufficient to argue that the economy is not growing for this reason. With varying degrees of volatility, the rest of the economy is not rebounding and remains so flat that even a minor event within the country’s overall economic activity is capable of affecting the total change. Moreover, even if we were to eliminate that entire effect, according to our estimates, the economy would have contracted by 0.5% year-over-year—exactly what we had projected.
Our economy’s low growth potential should be a top concern, regardless of what monthly data may indicate. Recently, the National Productivity Commission has published a series of reports highlighting the enormous obstacles that various industries face in investing, growing, innovating, and hiring. The various regulations—many of which are disjointed, contradictory, and outdated—even hinder competition and the entry of new players, with all the negative consequences this entails for producers, consumers, and the government itself. Policies focused on solving these problems should be at the top of the legislative agenda, so that in the future, a two-day strike by a particular union won’t even make a dent in the Imacec.
