Peru | Normalization of activity continued in July, but tends to peter out

Summary

Output fell in July by 11,7% YoY, a more moderate print than those observed in previous months, reflecting the gradual resumption of economic activity (phase 3 began in July).

Key points

• Key points:
• Output decline was widespread by productive sectors, with the exception of some services (financial, telecom) that have been showing a good performance in recent months and fishing activities.
• There was also an overall moderation in the YoY contraction rates of the different productive sectors.
• Available indicators suggest that the normalisation of economic activity continued in August, but at a slower pace since then. This is explained by the fact that the beginning of phase 4 of the resumption of productive activities has been delayed, households’ confinement measures were tightened, and demand remains weak.
• One of the main factors behind the weakness of demand is employment. Job losses during the health crisis have been significant. In recent months, part of those lost jobs have been recovered, but not all of them and certainly not in the same conditions. It is likely that in what remains of 2020 the normalisation of employment will continue, but the conditions of that employment will hardly be the same, weighing on wages and, thus, households’ spending.

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