UPDATE: Argentina's Latest GDP Data Indicate Sharper Slowdown

BUENOS AIRES --Though still rosier than most economists' estimates for real economic output, the Argentine government's latest growth figures published Friday reflected a sharp slowdown in output.

Argentina's economy stagnated in May, and was up just 0.1% from the previous month, according to the national statistics agency, Indec. Most economists say Indec manipulates key economic data - a charge the government vehemently denies.

Whatever the case, May's data bring Indec's numbers closer into line with private-sector estimates that put the economy in a recession.

"The government's manipulation of the national accounts data seems to be occurring to a smaller degree," said Ramiro Castineira, an economist at Econometrica. "That doesn't detract from the fact that everyone in the market knows that the official numbers don't reflect reality, but at least they're closer to indicating the trend. They can't hide the reality of what is happening."

Indec's monthly estimate is considered a proxy for gross domestic product, which is reported on a quarterly basis.

Indec's numbers show 12-month growth is still running at a pace of 3.9%, which goes against what most economists say is obvious: Argentina has been in a recession since the fourth quarter of 2008.

"For me, there's no doubt we're in a recession," said Fausto Spotorno, chief economist at Orlando J Ferreres & Asociados, or OJF. "Over the past six months, GDP has declined by an average of around 5.8% each month."

OJF estimated that Argentina's GDP fell 7.2% in May after declining by a similar amount in April. The consulting firm has already published its estimate for June, which showed a 5.5% decline.

Argentine President Cristina Fernandez has said there's "no way" Argentina will experience a recession this year. Yet numerous economic indicators seem to underscore the idea that the economy is struggling.

According to virtually all private-sector estimates, industrial production has declined sharply in recent months on plunging demand for cars and other items. Meanwhile, retail sales and industrial demand for power also have declined notably.

"Domestic consumption is pretty poor, and unemployment is worsening," said Spotorno. "Argentina doesn't have the possibility of recovering on its own. The state isn't helping because it doesn't have the financing to do so. Argentina depends on the world economy. Fortunately, Brazil and China seem to be improving, and that will give Argentina some space to grow next year."

Not all economists are that pessimistic. Carolina Schuff, an economist at the think tank Abeceb.com, said the recession isn't as deep as some think.

Schuff estimates that GDP declined by 0.6% in the first quarter and by even less in the second.

A recent congressional election could improve consumer sentiment by raising hopes that a stronger opposition will push the government to shift its economic policies and be more open to change, she said.

"Clearly, a change in expectations would positively affect the economy," she said. "But we need to see where things go on the political front. Negative expectations had a very strong impact on the economy last year."

Meanwhile, energy shortages have led the government once again to ration natural gas to industrial firms, which could further affect GDP.

"Energy restrictions limit potential GDP and are likely to impact the ... real GDP performance [in the third quarter]," Goldman Sachs analyst Alberto Ramos said in a research note Thursday.

"However, because gas-rationing has been a recurrent annual feature since 2004, we believe that many industries already have back-up energy systems in place and are also likely to adjust production schedules towards months where the likelihood of energy shortages is lower," he said