/Scotiabank: El Niño impact was less than expected
Scotiabank: El Niño impact was less than expected

Scotiabank: El Niño impact was less than expected

The Gross Domestic Product (GDP) grew 0.7% in March, a rate similar to that registered in February, despite the negative effects generated by the El Niño Phenomenon, explains Pablo Nano, head of Economic Studies at Scotiabank Peru in its last Weekly Report.

“The reported March GDP result by the INEI it was opposite to what was expected by the consensus of analysts (-0.5%) surveyed by Reuters and to our estimate (-0.9%). In our case, the main differences were in the Manufacturing sectors (1.8%) , Transportation-Warehousing (1.4%) and Other Services (3.4%), which together contributed 0.9 percentage points to the March result, “says Nano.

Regarding Manufacturing, a positive result was expected from Primary Manufacturing (5.1%) , indirectly benefited by the growth of the sector
Fishing (37.3%). However, what was surprising was the growth of Non-Primary Manufacturing (0.7%), which registered its greatest expansion since April 2016, explained in part by a calendar effect greater than expected – in March 2017 there were two business days more in relation to 2016, since this year the Easter holidays were celebrated in April and not in March -.

The Bank’s Economic Studies Area also drew the attention of the evolution of the Transportation and Storage sector, considering the temporary interruption of roads in the north and center of the country. “We expected a greater drop in the Land Transportation item compared to that published by the INEI (-0.09%). In the
case of the Other Services item -which weighs close to 15% of GDP-, the INEI does not publish disaggregated information “, highlights the specialist.

OUTLOOK
In April, Leading indicators suggest that the weakness of economic activity would have continued, with a rate of expansion similar to that reported in February and March. Thus, electricity production grew only 0.2%, while public investment fell 18.2%, a rate higher than the 10.2% in March. Likewise, new vehicle sales fell 17% in April due to a lagged El Niño effect.

However, in April the effects of the higher anchovy catch quota would begin to be felt – it went from 1.8 million in the first season of 2016 to 2.8 million in 2017- This effect would become more noticeable in May and June, months in which the direct and indirect contribution of anchovy fishing to GDP would exceed one percentage point, bringing the growth of economic activity to levels close to 3% in the next two months.

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