Argentina economic activity seen back in the red in June

By Hernan Nessi

BUENOS AIRES (Reuters) - Argentina's economic activity likely fell in June versus the same month a year earlier, analysts said, back in the red after a rare rise the month before amid tough austerity measures and cost-cutting under libertarian President Javier Milei.

The median forecast from 16 analysts sees economic activity down 1.9% year-on-year in the sixth month of the year, dropping back from May's 2.3% rise, as growth in the grains and gas sectors is weighed down by weak consumption and construction.

The president's cost-cutting agenda has helped achieve rare fiscal surpluses and has allowed the central bank to rebuild reserves, but the economy has suffered, with consumption, construction and manufacturing down sharply.

"The economies of major cities, centrally linked to consumption and the industrial and construction sectors, continues to show a strong downward trend," said Pablo Besmedrisnik, an economist at VDC consultancy.

Meanwhile, agriculture is seen rebounding from a low base recorded a year ago and the oil and gas sector is seen growing due to a boost in shale production, Besmedrisnik added.

Analysts forecasts ranged between a maximum drop of 3.2% and maximum growth of 2.0%.

Juan Massot, research director at the Universidad del Salvador in Buenos Aires, said that the economy's decline was approaching its bottom, although this isn't consistent across all sectors.

"While primary sectors like agriculture, mining, and hydrocarbons are growing, those sectors reliant on domestic consumption and the population's real income aren't faring as well," said Massot.

Economists said they expect Argentina's recovery to be slow, as the government works to contain monetary expansion and prioritizes a restrictive fiscal policy in order to combat an inflation rate over 260% on an annual basis, which despite a recent slowdown remains the highest in the world.

Argentina's statistics agency INDEC will publish its monthly economic activity estimate for June on Wednesday.