Argentina June GDP Proxy Up 6.4% on Year - Indec

Wall Street Journal

Argentina June GDP Proxy Up 6.4% on Year - Indec 
BUENOS AIRES--Argentina reported robust economic growth in June, although the pace slowed somewhat from the steep rebound reported in May.

The national statistics agency, Indec, said its June economic activity indicator rose 6.4% on the year and was up 0.4% on the month.

That compares to the 7.8% year-on-year growth and 0.6% month-on-month growth reported for May.

The indicator, known by its Spanish acronym Emae, includes most of the components used to calculate quarterly gross domestic product.

During the first five months of the year, the Emae expanded by 5.1% on the year, Indec said.

The government figures point to a significant rebound from the lackluster 1.9% GDP growth reported last year. Currency controls, barriers to imports and slack demand from top trade partner Brazil took a toll in 2012.

However, many economists accuse the government of exaggerating growth data for political gain.

"We suspect that the growth numbers officially reported may be overstating the strength of Argentina's growth dynamic ahead of [October's] important mid-term Congressional elections," Morgan Stanley Research said in a report.

In addition, the economic contraction seen at this time last year provides a low base for comparison and an "illusion of stronger growth," Morgan Stanley said.

Local financial advisory Consultora Ledesma said that Argentina's economy expanded by just 2.5% on the year in June.

Indec is thought to overstate growth due to the widespread belief among economists that the agency underreports inflation.

Most economists think annual inflation is well above 20%, while Indec said its consumer price index rose 10.6% in July.

But rapid reported growth could mean Argentina has to make payments for billions of dollars on growth-linked securities, known as GDP warrants, that pay investors in December when GDP expands more than 3.2% during the previous year.