Argentina's economy posts sluggish rebound after sharp drop

Argentina’s economy recovered mildly in August after a much sharper drop in July as growth continues to sputter in the second half of the year. 

Economic activity rose 0.1 percent in August on a monthly basis, well off the 1.5-percent median estimate of analysts surveyed by Bloomberg. From a year ago, South America’s second-largest economy contracted 1.7 percent, according to government data published Wednesday. In good news for President Javier Milei, wages in Argentina’s formal private sector beat inflation in August for the third straight month, a positive signal for consumer spending ahead. 

Slower growth and job losses in the formal economy are eroding the political gains Milei sought to reap from lower inflation, his top accomplishment. Gross domestic product shrank in the second quarter and is expected to decline again in the third on a quarterly basis, which would mark a technical recession. 

A surge of exports led by energy and agriculture is spearheading growth in Argentina, but a prolonged downturn in manufacturing, construction and retail has watered down that expansion. Monthly economic activity in July dropped 2.8 percent from June, the worst one-month performance since the pandemic. 

A year from Argentina’s next presidential election, investors are paying close attention to growth and jobs as an informal bellwether of Milei’s chances at winning. His 39 percent approval rating has steadied in recent months, though it hasn’t recovered after worsening rapidly at the start of the year, according to LatAm Pulse, a survey conducted by Atlas Intel for Bloomberg News. 

Analysts surveyed by Argentina’s Central Bank last month forecast 1.5 percent growth in 2026, down from 3.2 percent at the start of the year.