Argentina enters technical recession

Argentina entered a technical recession in the third quarter.

GDP fell 3.5% year-on-year over the period, according to data from statistics agency Indec.

The economic contraction, however, was smaller than that reported for Q2, of 4.0%, revised up from an earlier estimate of 4.2%.

Indec data shows that domestic demand plunged and investment took a battering in Q3, with gross fixed capital formation down 11.2% from the same period of last year. The biggest drop was in the transport goods segment, of 36.0%.

Exports bucked the overall negative trend: on a seasonally adjusted basis, output rose 4.1%. "We'd be wary of pinning the improvement in net trade solely on the boost to competitiveness from a weaker peso," British research firm Capital Economics said in a report. "More than anything, stronger exports in Q3 appears to have been due to the fading effects of a drought."

Analysts expect the economy, hobbled by a confluence of factors including a drought and capital outflows, to shrink this year and next. Some forecast the economy will start to improve in the second half of 2019.