Peru seasonally adjusted GDP holds steady

Peru's economy grew a seasonally adjusted 1.6 percent between April and June of 2011, nearly the same as in the first quarter on recovering public spending and private investment, the government said on Monday. Data from the national statistics agency said Peru's economy grew 1.7 percent in the first three months of 2011 from the last 3 months of 2010, slightly adjusting previously released data.
"The seasonally adjusted data is encouraging in the sense that domestic demand remains strong, reducing the chances that the central bank may cut rates quickly," said Pedro Tuesta an economist at 4Cast consultancy in Washington. The central bank, which has held the benchmark interest rate steady for three consecutive months and meets again on September 8, has said it would "react proactively" if global economic conditions deteriorate.
The statistics agency also said Peru's economy grew 6.6 percent in the second quarter versus the same period in 2010. That compared to 8.8 percent year-on-year growth tracked in the first quarter of 2011. The rise in election polls of now President Ollanta Humala, a leftist, wreacked havoc in Peru's financial markets between late March and June as investors feared he would roll back free-market reforms that have been in place for two decades.
Construction ground to a virtual halt as businesses put projects on hold waiting for clearer policy signals. May year-on-year economic growth was the slowest in 15 months. But data released on Monday showed investment may have held up better than expected. Gross capital formation, or spending on fixed capital assets like buildings and machinery, expanded 4.2 percent in the second quarter from the first quarter. That figure had contracted 0.5 percent in the first quarter from the fourth quarter of 2010.
Since taking office on July 28, Humala has moved to reassure investors by appointing orthodox, pro-business ministers who pledge to continue to court foreign investment in what has been one of the world's fastest growing economies. The report released Monday also showed seasonally adjusted public spending contracted 0.6 percent in the second quarter, less than the 2 percent it contracted in the first quarter.