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  • Emerging Markets Debt Daily

    Argentina Growth Struggles to Lift Off

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    May 01, 2019

    Argentina’s economy shows signs of stabilization, but it continues to face major headwinds. A very strong ADP employment change in the U.S. sets up an interesting macro backdrop for the Federal Reserve’s meeting.

    Argentina’s economic growth showed a small sequential improvement in February, albeit the headline number still looks very bad (-4.8% year-on-year). It is tempting to say that the economy may be bottoming out. However, the latest bout of the currency’s weakness and the resulting tightening of the policy stance pose major headwinds going forward. We are also concerned that the latest election polls, which show a big lead for the former president Cristina Kirchner, may affect sentiment in the coming months, creating a negative feedback loop.

    We continue to keep an eye on Venezuela, where the National Assembly’s president, Juan Guaido, called to continue the anti-Maduro protests, asking members of the military to join him. For now, it looks like key armed forces figures—including Minister of Defense Vladimir Padrino—remain loyal to President Nicolas Maduro, but the situation is very fluid.

    An extremely strong ADP employment print in the U.S. (up by 275K in April) sets up a very interesting macro backdrop for today’s Federal Reserve (Fed) meeting (especially as it comes on the heels of a big upside surprise in April’s consumer confidence). The latest Institute for Supply Management survey, however, surprised significantly to the downside—and the moderation was widespread, affecting the manufacturing index, employment, prices, and new orders indices. So, the macro flow continues to send very mixed messages for the Fed to interpret.


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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