Fynsa
Resilience is the ability of a person or community to face and overcome adverse or challenging situations, such as the loss of a loved one, a serious accident, an illness, a natural disaster, or a social conflict, among others. This capacity involves not only physical and emotional resilience and strength, but also the ability to adapt, recover, and learn from difficult experiences, as well as the capacity to find new ways to live and thrive.
When we look at January’s Imacec—which rose 0.4% compared to the same month last year—the market is surprised, since it had expected, on average, a decline. It’s not that the market is obsessed with the idea of economic contraction, or that it tries to use its projections to alter the behavior of economic agents and thus “influence” the outcome; rather, when we feed the various variables that have explained the economy’s historical behavior into our “black boxes,” we get rather bleak projections. In this specific case, it’s not as if our colleagues were that far off (-0.5% y/y); in fact, there was a greater discrepancy in December, but it wasn’t as noticeable because both the estimates and the actual data showed the same sign. So what’s going on?
When we dig a little deeper, two components stand out: retail and services. Although these encompass countless different sectors and activities, they generally respond to similar expectations and fundamentals. Both were greatly boosted by measures to support families and pension fund withdrawals during the pandemic, although the services sector joined the trend a little later, due to the social distancing measures that were still in place. Consequently, once this liquidity began to dry up, one would expect the same to happen to the momentum of these sectors. That, in fact, is what happened. Year-over-year growth rates quickly began to decline, turning negative for retail and less positive for services. Certain specific factors prevented the services sector from slipping into negative territory (such as the normalization of the education sector), but it was only a matter of time before that happened.
However, the situation began to turn around. One metric that we economists like to look at is the change in the seasonally adjusted series, which is a statistical method used to eliminate effects such as business days, calendar composition, and recurring holidays, etc. Thus, even though the year-over-year figure remains negative, the monthly change in the retail sector has shown five months of growth, with the most recent figure accelerating compared to previous ones. All of this is occurring against a backdrop of a weakened labor market, falling wages, a negative economic outlook, and inflation that has yet to stabilize.
In the case of services, something similar occurs, although the explanations have ranged from educational services to business services, including health care and other personal services. In other words, the two sectors that should be leading the economic contraction are not only failing to do so but are actually contributing positively to the monthly changes.
¿Does this provide enough evidence to expect growth in 2023? Not at this point. Consumers, families, and businesses have shown a remarkable ability to adapt—which was evident during the pandemic—but there are certain factors that cannot be ignored, such as reduced ability to generate income, dwindling savings, and the ongoing uncertainty that has prevented a rebound in investment projects.
This should lead to a decline in economic activity over the course of the year, although we recognize that it will likely be less severe than what private-sector analysts, government institutions, and even international organizations are forecasting (as you can see, we’re not the only “doomsayers”). For our part, we will likely shift from being among the most optimistic to falling in the middle of the pack (we project a 1.0% decline), but we cannot rule out the possibility that, under certain conditions more favorable than the resilience we are seeing today, GDP might not show a decline (nor growth, for that matter) in 2023.
