BUENOS AIRES (Dow Jones)–Argentina’s industrial production grew significantly less than expected in October as a drop in demand for vehicles from neighboring Brazil and a loss in competitiveness due to the inflation-adjusted appreciation of the peso took their toll.
October’s manufacturing index rose just 4.1% on the year and was down 0.3% on the month in seasonally adjusted terms, national statistics agency Indec reported Friday.
Economists surveyed by Dow Jones Newswires had expected the government to report a 5.2% year-on-year gain.
Industrial production has slowed significantly in recent months as demand for goods suffered due to the global economic turmoil, particularly in Brazil, Argentina’s top trade partner.
The slack demand from Brazil hit Argentine car-makers particularly hard last month. The automobile industry is Argentina’s largest manufacturing sector.
Gang-buster vehicle sales and exports over the past year had fueled the sharp rise in the manufacturing base.
In October, the automotive sector saw an 11.6% slowdown on the month, but was still up 10.2% on the year, Indec said.
Slower economic growth in Brazil and the weakening of its currency, the real, have started to dent Argentina’s car exports, which account for about 57% of total vehicle production, according to consulting firm Orlando J. Ferreres & Asociados, or OJF.
A number of car makers have moved up vacations and cut back on production due to high inventories. Motor vehicle production totaled 73,237 in October, down 8.4% on the month, but still up 11.2% on the year, according to the auto makers association, Adefa.
Despite weaker export markets, car makers are still looking forward to a record year in terms of production and sales.
Adefa forecasts output of 840,000 vehicles in 2011, well above the previous high of 716,540 vehicles last year.
Despite the recent signs of a slowdown, manufacturers are benefiting from the government’s import substitution measures and an economy that is growing at about 9% a year. Raw steel production in October totaled 505,900 metric tons, up 8% on the year and a 7% increase from September, according to the steel chamber Acero.
Total industrial capacity utilization in October was 80.1%, down from 83.6% in September, according to Indec.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com
–Alberto Messer contributed to this article.
Source: http://online.wsj.com