Argentina’s Sluggish August Points to Technical Recession

Argentina’s economy is on track to enter a technical recession after a lukewarm recovery in August failed to make up for steeper losses in July, adding to President Javier Milei’s challenges ahead of next year’s election.

Construction activity grew 0.4% in August on a monthly basis, barely enough to cover the 4.4% fall in July. Manufacturing posted a 1.9% monthly bump after a 5.1% fall in July, according to government figures published Wednesday. The two sectors employ the largest share of formal workers in Argentina, making them key indicators for the real economy.

Argentina is expected to have fallen into a technical recession in the third quarter, according to the central bank’s market survey published Tuesday. Analysts estimated that gross domestic product fell 1% from July through September compared to the previous three months, which would be the second straight quarterly decline. Official data for third quarter GDP will be published in December.

Analysts in the central bank survey also revised down their 2026 annual growth projection to 1.5% from 3.5% at the end of last year.

“There was some recovery in both manufacturing and construction, but not nearly compelling enough to support the hope of avoiding technical recession,” said Jimena Zúñiga, an economist at Bloomberg Economics. “I don’t take the second and third quarters’ weakness at face value, given the heightened volatility in high-frequency data, but looking through that volatility does suggest the growth process is a lot softer than it seemed a few months ago.”

Milei downplayed concerns last month in an interview with Bloomberg about Argentina’s stalling economy, touting consistent annual growth that’s left him “very calm” about his chances to win another term in next year’s presidential race.

Investors are growing increasingly worried about the campaign next year as Milei fails to deliver the growth he promised when he was elected in late 2023, even as he’s successfully brought down inflation from crisis territory.

Milei’s approval rating sat at 38% in August, near the lowest levels of his presidency, according to an AtlasIntel poll for Bloomberg News. Some 70% of Argentines described the labor market as bad, the survey showed. Milei wrote off polls as unreliable in Argentina.