Argentina now has the best terms of trade in its history because of the increase in the price of mining, oil, and agricultural commodities. This indicates that the ratio of export to import prices in Argentina has achieved a historic peak. The issue at hand is that the expansion observed in the primary sectors is not translating into broader economic benefits, especially within the realms of construction, industry, and commerce. According to official data from the national statistics institute INDEC, these three sectors account for 37.5% of the total workforce in the country. The juxtaposition of unprecedented export achievements and the stagnation of labour-intensive industries, which have not rebounded in the context of a persistently weak domestic market, is generating a set of dynamics that may adversely affect Milei’s electoral viability in the upcoming presidential election. Estimates from the centre-right think tank Fundación Capital indicate that the economy is projected to expand by 1.9% year-on-year in 2026. That growth, however, is “to a large extent” the result of the statistical carryover from 2025.
Furthermore, the agriculture, mining, and hydrocarbons sectors are projected to contribute 1.1 percentage points to that growth, whereas construction, industry, and commerce are anticipated to make minimal or no contribution. In the second quarter of the year, construction experienced a contraction of 0.2% on a quarter-on-quarter basis and continues to be approximately 20% lower than its level in 2023. In the period of July to August, the Construya Index, which serves as a private gauge of construction activity, experienced a decline of 7.7%. Concurrently, domestic cement shipments decreased by 6.4% in comparison to the second quarter. Bulk cement shipments have also experienced a continued decline, decreasing by an average of 2.1% year-on-year during the months of July and August. The commerce sector exhibited “weak momentum,” reflecting a seasonally adjusted 0.8% quarter-on-quarter decline in the second quarter, as indicated by GDP data released by INDEC last week.
The same data confirmed a 2.4% quarter-on-quarter contraction in private consumption. “Although real incomes bottomed out in the first quarter of the year, the subsequent recovery has been very modest amid continued adjustments to utility rates,” Fundación Capital explained. Consumer confidence persists in indicating fragility, decreasing by an additional 0.3% in the third quarter relative to the preceding quarter, resulting in a total decline of 9.6% for the year. Supermarkets and the industry indicate a deficiency in demand. On Monday, INDEC published its survey regarding business trends within the supermarket sector. Lack of demand continued to be the primary constraint on growth in the sector, as indicated by 59% of respondents. The same survey was conducted among industrial companies and produced similar results: 53% attributed their challenges to a lack of demand, while 10% pointed to competition from imported products. According to official data, Fundación Capital has indicated that in the first half of the year, merely six out of the 24 industrial divisions experienced growth, with oil refining leading at +10.2% year-on-year, followed by chemicals and chemical products at +8.1% year-on-year.
Food and beverages exhibited minimal variation, decreasing by 0.1%. In contrast, the most significant declines were observed in textiles, which fell by 25.3%, followed by machinery and equipment with an 18.9% decrease, and motor vehicles and auto parts, which saw an 11.1% drop. “Entering the final quarter of the year, economic activity continues to show no broad-based dynamism,” the think tank said, adding that “there are no robust growth engines in sight” beyond the export-oriented sectors. Therefore, looking ahead to next year, economic activity “is shaping up to be one of the main challenges, particularly given the electoral calendar.” The think tank also projected that economic activity next year would follow a similar pattern to 2026. “Those sectors currently leading growth would continue to show the strongest momentum, while it is difficult to anticipate a very pronounced recovery in sectors more closely linked to consumption and investment.”
