BUENOS AIRES (Dow Jones)–Argentina’s Torcuato Di Tella University said Thursday that its closely watched index of leading economic indicators signaled a 70% chance that South America’s second-largest economy could enter into a recession in the near term.
The odds of a recession stood at just 40% in last month’s report.
UTDT, as the university is known, said in a statement Thursday that its most recent leading-indicator reports «suggest a moderation in the growth of economic activity in the coming months.»
The index is conceptually similar to the Conference Board index in the U.S., which tries to predict turning points in the economy.
The index–which measures 10 key economic indicators such as cement orders, metal fabrication, bankruptcies, and the stock market–fell 3.4% on the month and rose 3.7% on the year to 210.1 points in September.
About half the indicators that make up the index showed expansion, with the rest posting declines.
«In seasonally adjusted terms, the biggest deterioration was observed in the series related to the performance of the financial markets,» UTDT said.
Aldo Abram, director of think tank Fundacion Libertad y Progreso, said the participation of the business sector in the index is worth noting.
«Businessmen are the people who are best informed about is going on. They tend to act on expectations before the general public,» he said in a telephone interview.
President Cristina Kirchner has made high growth a priority of her administration even at the cost of inflation, which most private-sector forecasters say is anchored above 20%.
Argentina’s economy is expected to grow at least 8% this year, thanks to a hefty fiscal stimulus, a consumer spending spree and strong demand for its exports of manufactured goods and grains.
Indeed, those same factors largely explain average annual growth of 7.6% between 2003 and 2010.
Kirchner won re-election by a landslide last month as voters rewarded her for the prosperity and political stability they have enjoyed since her late husband and predecessor, Nestor Kirchner, was sworn in as president in 2003.
But galloping consumer prices threaten Argentina’s boom. Inflation has fed even higher wage increases and caused the peso to appreciate in real terms to the detriment of exporters in the manufacturing sector.
Argentina’s last official recession was during the 2001-02 economic meltdown when the country defaulted on about $100 billion in sovereign debt and exited a controversial foreign-exchange system that pegged the peso to the U.S. dollar.
But most economists say Argentina suffered a recession two years ago, when the global financial crisis caused the economy to contract 2% to 3% in 2009. The government’s heavily criticized data show the economy grew 0.9% that year.
–By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, ken.parks@dowjones.com
–Taos Turner contributed to this article.
Source: online.wsj.com/