Argentina's economy posts sluggish rebound after sharp drop

Argentina's economy experienced a modest rebound in August following a sharper decline in July, as growth remains sluggish in the second half of the year. Economic activity increased by 0.1 percent month-over-month, falling short of the 1.5-percent forecast from Bloomberg's surveyed analysts. Compared to a year ago, South America's second-largest economy contracted by 1.7 percent, according to official data released on Wednesday.

President Javier Milei, whose approval rating has remained steady at 39 percent, saw wages in Argentina's formal private sector outpace inflation for the third consecutive month in August, signaling positive consumer spending ahead.

However, the slower growth and job losses in the formal economy are undermining the political gains Milei hoped to achieve from reduced inflation, his primary achievement. Gross domestic product (GDP) contracted in the second quarter and is projected to decline further in the third quarter, signaling a technical recession. Exports, led by energy and agriculture, have been driving growth in Argentina, but the slowdown in manufacturing, construction, and retail has dampened this expansion.

In July, monthly economic activity decreased by 2.8 percent compared to June, marking the worst single-month performance since the pandemic began.

With the country's next presidential election approaching, investors are closely monitoring growth and job figures as a leading indicator of Milei's prospects for re-election. Despite his stable approval rating, it has not rebounded from the rapid decline it experienced at the beginning of the year, as reported by LatAm Pulse, a survey conducted by Atlas Intel for Bloomberg News.

Analysts polled by Argentina's Central Bank last month projected a 1.5-percent growth rate for 2026, a significant drop from the 3.2-percent forecast at the start of the year.