Argentina’s sluggish August points to technical recession

Argentina's economy appeared to enter a technical recession following a lackluster August performance, according to government figures released on Wednesday. The August growth was insufficient to offset the significant decline in July, highlighting the challenges President Javier Milei faces ahead of the 2026 election. The construction and manufacturing sectors, which dominate the formal workforce, contributed only 0.4 percent growth in August, after July's 4.4 percent contraction.

Manufacturing saw a modest 1.9 percent increase, following a 5.1 percent drop in July. The central bank's market survey projected that GDP fell by 1 percent from July through September compared to the preceding three months, indicating a second consecutive quarterly decline. Official third-quarter GDP data is due in December. Economists revised their 2026 annual growth forecast downward to 1.5 percent from 3.5 percent last year.

Analysts noted that while there were some signs of recovery in construction and manufacturing, they were not enough to prevent a technical recession. Jimena Zúñiga, an economist at Bloomberg Economics, expressed skepticism about the recent improvements, suggesting the growth slowdown is more pronounced than previously thought. Milei previously dismissed concerns about Argentina's economic slowdown, citing consistent annual growth that has reassured him about his chances of winning re-election.

However, investors are increasingly doubtful about Milei's ability to fulfill his pre-election promises of robust growth as inflation remains a concern. In August, Milei's approval rating dropped to 38 percent, the lowest in his presidency, with 70 percent of Argentines describing the labor market as unfavorable. Despite the economic struggles, some Argentines dismissed polls as unreliable, as predicted by Milei.