UPDATE 2-Argentina's annual industry output falls, 1st drop in decade

Thu Jan 24, 2013 3:29pm EST

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* December declines 3.4 percent yr/yr, more than expected

* Annual output pulled down by auto, metals industries

By Hilary Burke

BUENOS AIRES, Jan 24 (Reuters) - Argentina's industrial production fell in 2012, the first decline since a wrenching economic crisis a decade earlier.

Factory output shed 1.2 percent in 2012 due to shrinking automobile and basic metals output as well as weak domestic and external demand, the government said on Thursday.

A long boom in Latin America's No. 3 economy ended last year because of sluggish global conditions, high inflation, a drought-hit 2011-12 grain harvest, and the impact of government import and currency controls on investment.

In December, industrial production fell by a larger-than-expected 3.4 percent from a year earlier. Nine analysts polled by Reuters had forecast a 0.6 percent median decline, with estimates ranging from -1.6 percent to +3.1 percent.

Factory output dipped 0.6 percent in December compared with November, seasonally adjusted, the government said.

Last year's poor performance partly stemmed from a downturn in the auto industry, which depends heavily on exports to Brazil. But tough import rules also played a role by delaying the entry of some foreign-made parts, and domestic demand cooled as overall economic growth slowed.

The government said car-making fell 6.6 percent in 2012 while the production of basic metals, including raw steel and primary aluminum, shed 8.7 percent.

In December, the decline in industrial production was fueled by a 14.6 percent drop in basic metals and a 9.5 percent decrease in construction materials.

The construction industry has been hurt by a virtual ban on dollar purchases that roiled the real estate market, where most transactions were made using the U.S. currency.

"The industrial sector is expected to benefit from the recovery in Brazilian activity forecast in 2013," BNP Paribas said early on Thursday in a research note.

The bank added that private economists estimated Argentina's annual industrial output fell by 1.9 percent in 2012 - worse than the 1.2 percent decline reported officially.

Analysts have long accused of the government of releasing overly optimistic economic growth and industrial production figures, while grossly understating inflation. The country faces possible sanctions by the International Monetary Fund over the accuracy of its statistics.

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