Javier Milei’s government is seeking to reassure markets amid growing concerns that an economic recession may be just around the corner, while investors are increasingly focused on the libertarian president’s electoral prospects.
Against this backdrop, two indicators released in recent days have helped revive optimism, at least to some extent.
First, the Consumer Confidence Index (ICC), compiled by Torcuato Di Tella University, rose 0.8% month-on-month in October, following a 2.4% increase in September.
Regionally, the improvement was driven entirely by the City of Buenos Aires, where the index surged 6.8%, almost entirely reversing a decline of the same magnitude in the previous month.
Historically, the ICC has proven to be a good proxy for trends in the Government Confidence Index (ICG), which is due to be released on Monday and, in turn, serves as a useful indicator of support for the ruling party at the polls.
However, there are doubts about whether the correlation between the two indices still holds.
“Although the ICC and ICG have historically tended to move in the same direction, this relationship has decoupled in recent months,” analysts at Portfolio Personal Inversiones (PPI) wrote in their latest report.
They noted that in September, consumer confidence rose 2.4% while confidence in the government fell 6%. In July, the opposite pattern emerged: the ICC declined 1.1%, while the ICG rose 6.4%.
Wages rebound
The other positive indicator for the government was INDEC’s August wage data, which showed an improvement in real terms.
Wages in the registered sector rose 2.6% month-on-month. After adjusting for inflation, they increased by approximately 0.9%.
“If this recovery is sustained, it could provide some relief for consumption and, in turn, for the retail and services sectors,” brokerage firm Cohen Aliados Financieros said in a recent report.
However, the firm warned that the recovery might “not come in time.” With elections a year away, an economy that “fails to take off” could “weigh on public sentiment and put upward pressure on the country’s risk premium.”
Indeed, Argentina’s country risk index closed at 710 basis points, up 17% so far in October and moving further away from the July low of 400 points.
The political focus
Economist Gustavo Ber, who specializes in financial markets, said political signals are attracting “the most attention” from the market, as investors “have been showing less sensitivity” to economic data.
He added that the view that the state of the economy is unlikely to change enough to improve the government’s electoral prospects is “gaining consensus.”
Perhaps that is why Milei acknowledged on Thursday that “Argentina’s indicators are not looking as good as they used to,” although he insisted on “how great a change” his administration has achieved since taking office.
“The snapshot is horrible, but the movie is the best in history,” he said, defending his administration’s record on poverty, inflation and public safety.
“I am the first president to bring inflation down,” he declared on his 56th birthday.
La entrada Wages and consumer confidence improve, but is it too late? se publicó primero en Buenos Aires Herald.