The first quarter of 2024 marked Argentina's sharpest economic contraction since the pandemic year of 2020. The adjustment program launched by the incoming Milei administration in December 2023 — centered on a 54% devaluation of the official exchange rate, significant reductions in energy and transport subsidies, and a freeze on public works spending — was designed to rapidly close the fiscal deficit. It achieved that objective, but at the cost of a dramatic compression of domestic demand that rippled through nearly every sector of the economy. INDEC's Monthly Economic Activity Estimator (EMAE) showed a year-on-year decline of 8.4% for the first quarter as a whole, with individual months recording falls of 8.1% (January), 7.0% (February) and 9.9% (March) respectively.
Construction: the hardest-hit sector
Among all sectors tracked by INDEC, construction suffered the most severe contraction. The Construction Activity Indicator (ISAC) fell 34.5% year-on-year in Q1 2024, driven by the near-complete halt in public works projects and a sharp decline in private residential construction. The suspension of national public works was one of the most immediate policy choices of the new administration — a sector that had been a significant source of activity in 2022-2023 essentially went dark overnight. Cement sales, the most widely used proxy for construction activity, fell 39.2% year-on-year in the quarter. Employment in the construction sector is heavily informal, meaning the activity collapse translated directly and rapidly into income losses for workers who had no unemployment insurance to cushion the shock.
Industry and commerce: broad-based weakness
Manufacturing output, measured by INDEC's Industrial Production Index (IPI), declined 12.8% year-on-year in Q1 2024. The falls were broad-based: food and beverages fell 7.1% (driven partly by reduced domestic purchasing power), vehicles and auto parts contracted 20.3% (reflecting both domestic demand weakness and disruptions in the Mercosur automotive value chain), and basic metals fell 18.4%. Retail sales dropped 18.3% in real terms, as wage-earners across the economy saw their purchasing power compressed by the acceleration of inflation following the December devaluation. The Consumer Price Index rose 25.5% in December alone — the highest single-month inflation rate in more than three decades — and cumulative inflation for Q1 2024 reached approximately 51%. Against this backdrop, households cut discretionary spending sharply while attempting to maintain basic food and utility expenditures.
Services resilience and financial sector growth
Not all sectors contracted at the same rate. The services sector as a whole showed more resilience, declining 5.2% year-on-year — a meaningful fall, but substantially shallower than the goods-producing sectors. Within services, telecommunications, professional services and health recorded smaller declines or rough stability. The financial services sector was the single major sector to record growth in Q1 2024, expanding 3.1% year-on-year. This expansion reflected the sharp rise in interest rates — which reached above 100% annually in real terms at points during the quarter — as banks and financial intermediaries benefited from the spread between deposit rates and lending rates in a high-inflation, high-interest-rate environment. Our dashboard on economic activity provides monthly EMAE data by sector, allowing users to track the trajectory of each industry through the adjustment period and beyond.
Labor market: unemployment and confidence
The labor market impact became visible in the unemployment data from the Permanent Household Survey. The unemployment rate ticked up to 7.7% in Q1 2024 from 5.7% in the preceding quarter — a significant jump, though still below the levels seen during the 2001-2002 crisis or the 2020 pandemic shock. Underemployment — workers employed but seeking additional hours — also increased, reflecting the adjustment in hours worked even among those who retained their jobs. Consumer confidence, as measured by the Torcuato Di Tella University index, fell to 32.7 points in February 2024 — its lowest level since 2019, and approaching the range historically associated with the most pessimistic economic episodes in Argentina's recent history. For detailed wage and employment data broken down by sector and region, our dashboard on employment and wages provides comprehensive time series from the EPH survey.
