Argentina’s economy contracted for a second straight month in May, underscoring a trend of uneven growth more than halfway through President Javier Milei’s term.

Economic activity fell 0.5 percent from April, below the 0.2 percent rise estimated by Bloomberg Economics, according to government data published Wednesday. From a year ago, the gross domestic product proxy grew 0.2 percent, below the 2.5 percent median estimate of economists surveyed by Bloomberg.

Agriculture and mining led growth on an annual basis, while manufacturing and retail fell. Earlier indicators had already previewed an uneven performance across the economy, with exports expanding while weak imports and tax revenues point to tepid domestic demand.

Moody’s Ratings became the third and final major credit rating company to lift the country’s credit score Tuesday, strengthening the case for Argentina’s return to international debt markets. Inflation also slowed for a third straight month in June to the lowest level since August in another win for Milei.

“Another monthly contraction in May reflects volatile Argentine activity data more than a fundamental shift in the country’s growth trajectory.

“The data support our view that the agriculture- and mining-led expansion will remain solid, rather than spectacular. Strength in these sectors continues to be offset by weakness in manufacturing, limiting positive spillovers to the broader economy,” said Jimena Zuniga, Argentina Economist for Bloomberg.

Argentina’s gross domestic product grew 0.7 percent in the first quarter, more than expected, compared with the previous quarter on consumer spending – but the weakest performance was in employment-rich sectors. Argentine GDP is forecast to expand for the second straight year in 2026, driven by record exports from energy, agriculture and mining. Yet unemployment continues to rise as the formal labor force sheds nearly half a million jobs.

“Investors remain concerned that uneven growth could eventually lead to a political shift next year,” Morgan Stanley analysts led by Fernando Sedano wrote in a July 10 note. “We keep thinking growth dynamics will become gradually less heterogeneous, as construction activity edges up and as consumers’ sentiment improves through a recovery in real wages and, later this year, a modest resumption of credit.”

Economists surveyed by the Central Bank in June forecast a 2026 year-end inflation rate of 30 percent, down from 30.5 percent, in the previous survey, with growth of three percent.

by Manuela Tobias, Bloomberg