Industrial activity demonstrated notable enhancement in June. Data from the statistics institute INDEC, released on Friday, indicates that the sector experienced a month-over-month growth of 0.9%, marking the second consecutive monthly increase, and a year-over-year growth of 2%. The most significant monthly increase was observed in oil refining, chemicals, rubber, and plastic products at 4.4%. This was succeeded by furniture and other manufacturing industries, which saw an increase of 1.8%, and food, beverages, and tobacco, which rose by 1.5%. The most significant reductions were observed in equipment, appliances, and instruments (-7.4%), motor vehicles and other transportation equipment (-3.9%), textiles, apparel, leather, and footwear (-2%), as well as nonmetallic minerals and basic metals (-1.9%).
However, this improvement was insufficient to counterbalance the decline observed at the beginning of 2026, as manufacturing output decreased by 2.2% in the first half of the year. Industry has declined by 7% since the onset of the Milei administration. The ongoing decrease since December 2023 can be attributed to multiple factors. One reason is that the government implemented a trade liberalisation policy that is unprecedented in Argentina in recent decades. This compelled Argentine manufacturers to contend with products from China and Southeast Asia, which were significantly less expensive than their domestic equivalents. A prime example of this is the textile sector, which has faced significant challenges due to foreign competition and the rise of Chinese platforms such as Shein and Temu.
Textile production in the first half of the year experienced a significant decline of 24.4%. The most recent data on capacity utilisation was recorded at 42.2% in May. The second explanation resides in the decrease in disposable income available for consumption. This is associated with a decline in purchasing power since Milei assumed office, escalating household delinquency rates, and hikes in utility rates. This situation also impacted the construction sector, an industry that is significantly dependent on industrial manufactured goods. A report released on Friday indicated that sector activity declined by 4.1% month-over-month in June, yet it was still 4% higher than the same period last year.
With the advent of the libertarian administration and the cessation of public works initiatives instituted by Milei, construction activity has declined by 20% compared to the levels recorded in November 2023, the final month preceding the governmental transition. “In both cases, the trend is one of stagnation,” stated Santiago Casas. On one hand, since the beginning of the year, peso-denominated credit has stopped being a catalyst for these sectors, due to elevated interest rates affecting both individuals and businesses. Furthermore, investment has “yet to take off,” and wages are facing challenges in regaining purchasing power, which constrains the recovery in consumption. Until these three variables improve again, Casas added, manufacturing and construction will likely “continue to alternate between gains and setbacks.”