Export boom not enough to offset industry, commerce drop

Thanks to the surge in oil, mining and agricultural commodity prices, Argentina currently enjoys its strongest terms of trade in its history.

This means that the ratio between Argentina’s export and import prices has reached an all-time high.

The problem is that this growth in the primary sectors is failing to spill over into the rest of the economy, particularly construction, industry and commerce. These three sectors employ 37.5% of all workers in the country, according to official data from the national statistics institute INDEC.

The contrast between record export performance and labor-intensive sectors that have failed to recover amid a still-weak domestic market is creating a combination of factors that could weigh on Milei’s electoral competitiveness in next year’s presidential election.

Misleading growth According to estimates by the center-right think tank Fundación Capital, the economy is expected to grow 1.9% year-on-year in 2026.

That growth, however, is “to a large extent” the result of the statistical carryover from 2025. In addition, the agriculture, mining and hydrocarbons sectors are expected to account for 1.1 percentage points of that growth, while construction, industry and commerce would make little or no contribution.

In the second quarter of the year, construction declined 0.2% quarter-on-quarter and remains about 20% below its 2023 level.

In July-August, the Construya Index — a private estimate of construction activity — and domestic cement shipments fell 7.7% and 6.4%, respectively, compared with the second quarter.

Bulk cement shipments also continue to decline, falling an average of 2.1% year-on-year in July and August.

The commerce sector also showed “weak momentum,” with a seasonally adjusted 0.8% quarter-on-quarter decline in the second quarter, according to GDP data published 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 continues to signal fragility, falling another 0.3% in the third quarter compared with the previous quarter, bringing its cumulative decline for the year to 9.6%.

Supermarkets and industry point to lack of demand On Monday, INDEC released its survey of business trends among supermarkets. Lack of demand remained the main factor limiting growth in the sector, cited by 59% of respondents.

The same survey was conducted among industrial companies and produced similar results: 53% blamed a lack of demand, while 10% cited competition from imported products.

Based on official data, Fundación Capital warned that during the first half of the year, only six of the 24 industrial divisions recorded growth, led by oil refining (+10.2% year-on-year) and chemicals and chemical products (+8.1% year-on-year).

Food and beverages remained virtually unchanged (-0.1%), while the largest declines included textiles (-25.3%), machinery and equipment (-18.9%), and motor vehicles and auto parts (-11.1%).

“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.”