Chile’s economic activity rose 0.5% in July from the same month a year earlier, below even the most pessimistic forecasts, as growth in services and retail was weighed down by declines in manufacturing and mining.
Chile’s economic activity index, IMACEC, encompassing about 90% of the economy tallied in gross domestic product figures, was also affected by calendar factors and was the weakest performance since August 2014.
Economists had estimated a median 1.2% expansion in a Reuters forecast, with a range of between 0.7 and 1.7%.
In comparison with June, economic activity increased a seasonally adjusted 0.1%, the central bank said.
Cooling demand for copper in China has driven down global prices and hurt the economy of Chile, the world’s biggest producer of the metal.
“The real business cycle forward momentum weakened visibly during the second quarter of 2016, undermined by less stimulative monetary and fiscal policies, subdued consumer and business confidence, soft external demand, and a deteriorating labor market,” said Alberto Ramos at Goldman Sachs.
The central bank is widely expected to stay neutral on the benchmark interest rate after a period of a bias towards hikes, in response to the continually weak economic data and cooling inflation.
The bank has estimated that Chile’s economy will grow between 1.25 and 2.0% this year, and the accumulated seven-month IMACEC of 1.7% keeps it within that range.
A year and a half after Chile’s Deputy Finance Minister Alejandro Micco said he could see the “green shoots” of recovery, and seven months after his boss Rodrigo Valdes said the economy had passed its “low point,” Chile’s economy remains in the doldrums. Increased fiscal spending has failed to revive consumer demand, while the mining industry remains depressed following a slump in copper prices.
