By Nicolás Misculin At a family-owned factory in Buenos Aires, a machine used to wrap packets of colored socks sits silent.

Eseka still produces nearly 3 million items a month at the factory, including underwear and swimwear for its Cocot and Dufour brands. But like many local businesses, it is struggling to stay afloat. Since President Javier Milei took office nearly three years ago, sales have fallen around 40%, battered by weak consumer demand and competition from cheaper imports as the government has lifted trade restrictions.

That matters in Argentina, where household consumption accounts for about two-thirds of gross domestic product, making any sustained pullback in spending a drag on the broader economy.

Economists says the economy likely slipped into a recession in the third quarter, a test of voter patience a year ahead of the October 2027 presidential election, when Milei is widely expected to run for a second term.

Some 32,300 businesses — roughly 6% of the total companies in Argentina — closed in the period from when Milei took power in December 2023 through to July, according to think-tank Fundar.

"The situation is critical," said Ricardo Kuchikian, who owns Eseka with his brother Gustavo. The firm posted losses last year and shed about 30% of its workforce, according to the brothers. Over half of the circular knitting machines in the sock factory stand idle. "Consumption has fallen very sharply over the past three years," Kuchikian said.

In the first nine months of the year consumption in Argentina fell 2.7% compared with the same period in 2025, according to market research firm Scentia, which tracks sales across supermarkets, small retailers and e-commerce platforms.

While Milei's radical austerity measures have slowed inflation to 30% from a sky-high 200% and brought other macroeconomic imbalances under control, their benefits have yet to reach much of the broader public. The share of Argentines living beneath the poverty line has risen to nearly a third of the population, after falling to an eight-year low in 2025.

To boot, Argentina likely dipped into recession in the third quarter, economists say, driven by austerity and tight monetary policy. A slight rebound is forecast in 2027.

Economic activity is forecast to have contracted for a second consecutive quarter in the July-September period, meeting the common definition of a recession. Official data for the quarter will be released in November.

“Argentina’s economy is technically in a moderate recession,” said Ricardo Delgado, head of consultancy Analytica. GDP already fell 0.6% in the second quarter from the first, and Delgado forecasts a further contraction of around 1.5% for the third quarter.

According to a recent survey by consultancy Giacobbe y Asociados, Milei’s approval rating slipped slightly in October to 36% while disapproval rose to 56%.

To be sure, not all of the economy is suffering. Energy, mining and agriculture have emerged as the winners under Milei’s model, driven by exports and investment in Argentina’s vast shale oil and gas reserves, as well as rising global demand for minerals such as lithium.

But the strength of these export-oriented sectors has so far not offset the slump in other industries tied to the domestic market. Textiles, auto manufacturing, retail and construction have all remained under pressure as consumers continue to feel the squeeze.

Analytica's Delgado said he expected that two-track economy to continue with "ups and downs" in 2027, warning that household finances were unlikely to improve meaningfully before the election.

Milei has ruled out changes to his economic plan, dismissing as "colossal stupidity" claims that people were unable to make ends meet.

Investors have cheered Milei’s easing of strict import restrictions, capital and currency controls and other regulations that long weighed on business in Argentina. But for many local firms, the shift has brought a painful adjustment, exposing them to cheaper imported goods just as domestic demand weakens.

Official data from August showed manufacturing fell 3.2% year-on-year, retail and wholesale trade dropped 3.5%, and construction declined 2.5%, according to Argentina’s INDEC statistics agency.

“Since the end of 2023, I think sales have fallen 40%,” said Martin Abigador, director of Dakuba, another family-owned business that distributes fabrics.

His company has been unable to offset what he described as "aggressive competition" from foreign imports, mainly from China.

Back at the sock factory, Kuchikian feared that if Milei's policies continue "national industry could disappear.”A spokesperson for the government defended the uneven pace of the recovery, saying that growth never occurs uniformly across sectors. "This is the economic program the president believes in, and he is not going to change it," the spokesperson said.