CHART OF THE WEEK
Fears that industrial output figures may signal a second consecutive economic contraction, and therefore a technical recession, were warded off as annualised GDP jumped 1.7% instead of the expected 0.3%. Although this preliminary estimate is to be viewed with caution given that second estimates based on more complete data are prone to significant revision, most of the upside is driven by household consumption.
OUR ANALYSIS
This welcome surprise has cast doubt over the possibility of new fiscal stimulus and, according to some, reduced the need to delay the VAT increase scheduled for April 2017. Stronger consumption may continue as a result of recent and ongoing wage inflation. That said, the government will undoubtedly seek to maintain the momentum. In the short term, the April 14th earthquake could weigh on the industrial sector but it will be partially offset by the reconstruction effort in the longer term. This may translate into a second-quarter slowdown followed by a significant acceleration.
The opinion expressed above is dated May 20th, 2016 and is liable to change.
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