(Adds cumulative activity figure, political and economic background, details from report, trade balance figure)
BUENOS AIRES, Aug 24 (Reuters) - Argentina’s economic activity expanded 4.0 percent in June compared with the same period the prior year, government statistics agency Indec said on Thursday, the latest sign of economic recovery ahead of legislative elections in October.
Economic activity in June rose 0.3 percent compared with May, Indec said. The economy grew a cumulative 1.6 percent in the first half of the year, marking a continued recovery from a biting recession in the first half of 2016. The economy contracted by 2.2 percent overall last year.
June marked the fourth straight month of year-on-year gains, providing a boost to President Mauricio Macri’s market-friendly government ahead of October’s mid-term vote, where a positive result could give political momentum to the rest of his agenda, including reforms to the country’s tax code and capital markets.
His “Let’s Change” coalition performed better than market expectations in a primary vote on Aug. 13, virtually tying former populist President Cristina Fernandez in a Senate race for politically crucial Buenos Aires Province. More economic improvements in the coming months could give Macri’s candidate the edge.
June’s expansion was led by a recovering manufacturing sector, which grew 6.2 percent after snapping a streak of 15 consecutive months of contraction in May. Agriculture, spurred by record wheat and corn crops, grew 4 percent.
Construction activity was up 13.2 percent compared with June of last year, driven by public infrastructure investment and growth in the real estate market as Macri’s government expands mortgage credits.
Also on Thursday, Indec said Argentina posted a trade deficit of $798 million in July, the seventh straight month with a negative balance. Exports grew 5.2 percent compared with the same month last year to $5.2 billion, while imports grew 29.9 percent to $6 billion. (Reporting by Buenos Aires newsroom; Writing by Luc Cohen; Editing by Diane Craft and Sandra Maler)