UPDATE 2-Argentina closer to exiting recession as economy grows in November

(New throughout; recasts; adds comment, background on Argentina’s economy)

BUENOS AIRES, Jan 26 (Reuters) - Argentina’s economic activity rose 1.4 percent in November 2016 compared with the previous month, government data showed on Thursday, the second straight month-on-month gain and a sign the economy may be emerging from a year-long recession.

That also marked the largest month-on-month jump since February 2015, according to government statistics agency Indec, which also revised its October figures upward to a 0.5 percent expansion from September. Last month it had said October economic activity was flat month-on-month.

Barring a sharp contraction in December, the data showed Argentina’s economy likely expanded in the fourth quarter of 2016 compared with the third quarter, after four straight quarters of contraction.

“This reaffirms that the economy is beginning to recover,” said Maria Castiglioni, director of Buenos Aires consultancy C&T Asesores Economicos, noting that a boost in construction activity, driven largely by public works spending that was all but absent earlier in the year, was a major factor.

“The sector that fell the most is now the one growing most rapidly.”

The economy shrank 1.4 percent when compared with the same month the prior year, the eighth straight month of year-on-year contraction but a much smaller drop than previous months, the data showed. Median expectations in a Reuters poll were for a year-on-year drop of 2.4 percent.

The impending recovery is welcome news for President Mauricio Macri, who is betting economic growth can buoy his center-right coalition to a strong performance in legislative elections in October to allow him to implement the rest of his reform agenda.

Since taking office in December 2015, Macri has implemented a number of market-friendly measures to stimulate activity. But the economy has remained in recession as inflation reduces purchasing power and a promised flurry of foreign investment has largely failed to materialize.

Among his reforms are an ambitious public works agenda, which Macri hopes will improve the country’s infrastructure while boosting construction employment and boosting demand for materials such as cement and metals.

He also lifted export taxes on corn and wheat, two of the agricultural powerhouse’s biggest cash crops, leading to large harvests and plantings while stimulating the transportation and automobile industries that depend on the grains sector, Castiglioni said.

In a presentation on Wednesday, Argentina’s central bank said its internal leading indicator had reached a level that normally indicates an expected exit from recession, suggesting the economy is currently in a recovery phase.

Reporting by Luc Cohen; Editing by Jonathan Oatis and Chizu Nomiyama