Peru May Growth Slows to 1.8% on El Niño Fishing Collapse

Peru’s economic growth decelerated sharply to 1.8% year-on-year in May, down from 3.73% in April, marking the weakest monthly performance of the year. The national statistics agency INEI reported on Wednesday that the sudden slowdown was driven almost entirely by an El Niño climate shock. On a monthly basis, economic activity fell 1.11% from April, underscoring the abruptness of the deceleration.

The warming of Pacific waters devastated the country's fishing sector, which collapsed by 73.1% year-on-year due to depleted anchovy and hydrobiological resources. This supply shock cascaded directly into primary manufacturing, dragging overall factory output down by 10.67%. Fishmeal and fish-oil processing alone plummeted 41.7%, compounding broader weaknesses in the textile production cycle.

Yet the headline figure masked a stark divergence within the economy. Domestic demand and services effectively absorbed the primary industry shock, accounting for roughly 95% of the month's total growth. Trade surged 6.91%, while construction grew 4.66%, accommodation and restaurants rose 5.05%, and electricity, gas, and water output gained 5.21%.

The mining and hydrocarbons sector provided critical support, returning to expansion with 2.6% growth after three consecutive months of decline. Government services expanded 3.69%, financial and insurance services rose 1.79%, and transport and courier services grew 2.42%. Telecommunications expanded a modest 0.65%. Agriculture and livestock barely moved, growing just 0.1% as a 1.99% increase in livestock output was largely offset by weakness elsewhere.

For investors and market professionals, the May print highlights the concentrated climate risk embedded in Peruvian industrial supply chains. While cumulative growth for the first five months of 2026 remains solid at 3.2%—with an annualized rate of 3.54% measured from June 2025 through May 2026—the extreme volatility in fishing and fishmeal processing signals ongoing vulnerabilities. Companies exposed to fishmeal exports face significant near-term earnings pressure.

Analysts caution that the intensity of El Niño in the coming months remains the critical variable for the fishing sector's recovery. A prolonged warm-water event could continue to suppress primary manufacturing, even if robust domestic trade and services activity keeps the broader Peruvian economy in positive territory.