This week's May average Gross Domestic Product (GDP) increased by 1.8%, putting the economy on track for annual growth of close to 9% q/q in 20% after a solid 3.4% in the first quarter. The agency explains that they are revising the growth forecast for the year to 3.9% y/y from just under 2.5%.

They do not see in the economy's performance signs of one-off, transitory factors driving growth, but rather signs of a synchronized upturn, manufacturing finally seems to be back to normal, construction is booming and other indicators related to domestic demand are performing well.

Manufacturing is likely to benefit from its composition, making it less dependent on the input shortages that are affecting production in other latitudes (Mexico).

In addition, there are increasing signs that the tide is turning favorably for global manufacturing, and particularly in the U.S. In the case of construction, part of the increase in output is related to the massive turnaround in public gross fixed investment, which had been on a persistently downward trend for the year until last february.

We see the upward trend continuing throughout the year. Finally, domestic demand indicators are also healthy with services growth accelerating. In short, we see a broad-based, self-reinforcing expansion now taking hold.

Equally impressive is the fact that the fiscal deficit continues to trend downward despite rising public investment.

Using the nominal GDP estimate for the year, the deficit narrowed to just 2.3% of GDP in june, with a primary surplus of 2% of GDP.

Much of this reflects the drop in pension-related spending following the latest swap, which has subtracted about US$140 million in expenditures, but revenues also increased by about US$200 million over 12 months compared to june last year.

Translated by: A.M