WRAPUP 3-Surging Argentine industry output boosts growth

Fri Oct 22, 2010 6:51pm EDT

Related Topics

* Factory output up 10.1 pct year-on-year

* Economic growth gathers speed, rising 8.5 pct yr-on-yr

* Trade surplus widens 22.8 percent, first rise since Jan.

* Grains exports up 200 pct in September yr-on-yr (Adds fresh analyst quote, minister, context)

By Helen Popper

BUENOS AIRES, Oct 22 (Reuters) - Argentina's industry output soared 10.1 percent in September from a year earlier, and also rose from the previous month -- another sign the country's economic growth remains strong, data showed on Friday.

Latin America's No. 3 economy is expanding at one of the fastest rates in the region, fueled by strong demand for Argentine-made cars and manufactured goods from neighboring Brazil and a record soybean and corn harvest last season.

September's year-on-year factory output figure matched the increase in August ARECI10. The EMAE economic activity index -- a close proxy of gross domestic product -- rose 8.5 percent in August, according to the official figure published on Friday by the INDEC national statistics agency. ARECI14

Industrial production rose 1.2 percent in September compared with August, according to the government's seasonally adjusted data.

The economy expanded by 0.3 percent in August compared with July, INDEC said, while the trade surplus widened in September for the first time in eight months as exports picked up.

"Industry is leading the strong economic growth this year (and) the success of our industry is also reflected in the exports," Industry Minister Debora Giorgi said.

Healthy growth rates are good news for President Cristina Fernandez ahead of next year's presidential election even though they force Argentina to pay out more on its GDP warrants -- securities tied to economic growth. [ID:nN01207204]

Fernandez's husband and predecessor, former President Nestor Kirchner, is expected to seek a second term in the October 2011 vote and analysts expect the government to maintain loose monetary policy despite high annual inflation estimated at about 25 percent. [ID:nN15224685]

However, some economic analysts think both industrial output and growth figures are overly rosy. That has deepened doubts over data published by the INDEC, widely accused of under estimating high inflation for more than three years.

"Even if the GDP growth data errs to the upside, the valuation on GDP warrants is still biased lower for the much more downward manipulation on the deflator statistics," Siobhan Morden, a strategist at RBS Securities, said in a report.

Year-on-year figures for both industrial output and growth are getting a boost from the low base of comparison with the same period in 2009. Industrial output shrank 0.2 percent in September 2009.

"We expect the industrial sector to continue to record solid growth in the coming months ... as domestic demand among some of the main trading partners remains strong, namely Brazil," said Alberto Ramos, a senior economist for Goldman Sachs.

TRADE SURPLUS WIDENS

Strong growth has stoked consumer demand for imports this year, but INDEC said the trade surplus ARTBAL=ECI widened 22.8 percent to $1.07 billion in September -- the first time the surplus has widened year-on-year since January and above the $950 million surplus forecast in a Reuters poll.

The INDEC said that exports jumped 41 percent in September versus the same month last year driven by increasing sales of grains and oilseeds, as well as vehicles and auto parts.

Argentina is the world's third-largest exporter of soybeans and the top supplier of soyoil and soymeal. The country's soybean exports are seen getting a boost from strong demand from China, the top importer of the oilseed. [ID:nN21106450]

Grains shipments increased by 200 percent in value in September versus the same month last year, boosted by higher prices and a larger harvest, where as beef exports fell 10 percent.

Imports, meanwhile, rose 46 percent in September on strong demand for capital goods for the manufacturing sector such as iron and steel, as well as fertilizers as farmers sow new season corn and soybeans.

Ample trade surpluses have allowed the country's central bank to replenish its foreign currency reserves, which Fernandez has tapped this year to meet debt repayments.

"Commodity prices relevant for Argentina's exports stand at supportive levels ... but torrid import growth will continue to dent the trade result," BNP Paribas analyst Florencia Vazquez wrote in a briefing note. (Additional reporting by Luis Andres Henao and Eduardo Garcia; Editing by Andrew Hay)

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