Business optimism rises due to the Tia Maria effect and higher consumption in July

Restart of operations of the copper project Aunt Mariain Arequipa, has anticipated a recovery in business expectations in the seventh month of the year. However, the effect on a possible increase in the minimum wage (RMV) in the following months has yet to be measured, as stated by President Dina Boluarte in her message to the Nation.

According to the recent Macroeconomic Expectations Survey-July 2024, prepared by the Central Reserve Bank of Peru (BCRP), Of the 18 indicators that measure the business pulse in our country, 15 were consolidated on positive ground.

Let’s start with the expectations of local entrepreneurs regarding the situation of the Peruvian economy in general. For the next three months, the score went from 50 to 51 points; while for twelve months, it remained at 59.

If we look at the sector in which the surveyed companies operate (manufacturing, fishing, mining, exports, etc.), the businessmen improved their rating for the next mobile quarter from 51 to 52 points, while for the next annualized period, from 59 to 60.

But they are not the only ones who look favourably on the economic externalities. Local businessmen also expect a recovery in their businesses: the expectation of improvement in the short term rose from 52 to 53 units, although in the long term it remains at 61.

All this is replicated by the good performance of businesses in July. Thus, the demand expected by entrepreneurs in the short term improved and went from 55 to 56 units, although it slightly decreased from 65 to 64 for next year.

Finally, the hiring expectation for the next three months remains at 51 points, although it improved slightly from 58 to 59 for the annualized horizon. In addition, planned investments, both in the short and long term, improved: progress from 50 to 51 and from 58 to 59, respectively.

Demand recovers

Antonio Castillo, general manager of the National Society of Industries (SNI), maintains that the BCRP measurement is in line with the studies carried out by the industrial association, with indicators that have been on the rise for the long term since June. However, on this occasion, “a recovery is already observed in the short term.”

For the specialist, there is “confidence that the economy will at least begin a process of growth,” although not for everyone. Construction, one of the sectors that leverages the industry, remains with a segment decline of -5% in leading indicators, although with a “striking growth in hiring” for the near future.

“There are important megaprojects “These are the ones that are currently in operation, and those are the ones that are driving business expectations. But we must not forget the micro and small businesses, which are still suffering,” says Castillo.

Along these lines, the BCRP survey also reveals that, in terms of the current business situation – no longer a mere expectation for the future – all indicators for July improved. There was a clear recovery in demand during the month of Fiestas Patrias, where many Peruvian families received the support of a bonus.

The business situation improved from 48 to 49 points, while sales rose from 51 to 53. This scenario could have also boosted future expectations. Castillo here rules out that the announcement of the increase in the minimum wage could defeat business hopes, “provided that it can be done as part of the National Labor Council.” He does, however, say that “there is no basis for a readjustment in the short term.”

The production score went from 50 to 52 units, while the ddemands respect compared to the previous month, it improved sharply from 38 to 42. Finally, orders compared to the previous month progressed from 48 to 51 points, and days of unwanted inventory were reduced from 15 to 14.

And not only that. As inflation moderates, expectations for input prices in the market are also falling, as is the average selling price to end users for the next moving quarter.

Growth and inflation expectations

● In July, inflation expectations for 2024 remained within a range of 2.5% to 3%. For 2025 and 2026, this variable is between 2.45% and 3%, respectively.
● Similarly, GDP growth expectations for 2024 were set at a range of 2.8% to 3%, given an “upward revision by the financial system and non-financial companies.” Growth in the same range is expected for 2025 and 2026.
● Finally, for 2024, the reference rate expectation of economic analysts and the financial system remained at 5%. For the end of 2025, this forecast was raised to 4.25%.