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Chilean Growth Rebounds in Q2

Exports of goods and services continued to indicate weakness with a drop of 3.5% year-on-year.
Exports of goods and services continued to indicate weakness with a drop of 3.5% year-on-year.

Chile’s economic growth expanded in the second quarter when compared with the prior quarter. The economy expanded 0.9% year-on-year and grew 0.7% quarter-on-quarter. The construction sector continues to impede the rapid growth of economy. Construction output, which is a vital sector of the economy, dropped 3.7% year-on-year and 1.3% quarter-on-quarter.

The second quarter result indicates that the economy has continued to suffer from its linkages to the remainder of the work and is probably one of the few economies that has not gained from the improvements in global economic activity, Econotimes reported.

Moreover, the ailments of the Chilean economy indicate how difficult it is to expand in the current global economic environment if the economy is not diversified in production. Although mining output rebounded in the second quarter on sequential terms, it continued to drop, falling 3%.

Even if the economy disappointed in the second quarter, the consumption figures were not as bad as the overall performance indicates. Personal consumption expenditures rose relatively strong at 2.6% on a year-on-year basis, while imports of goods and services rose sharply by 7%. This performance signified that domestic demand rose 3.9% on a year-on-year basis.

But gross fixed capital formation continued to drop, falling 4.1% on a year-on-year basis. This will continue to restrict the ability of the Chilean economy to expand at stronger rates in the near term. The reason for this decline was a 6.5% drop in investment in the construction industry, while investment in machinery and equipment recorded a slight rise of 0.1% year-on-year.

Meanwhile, exports of goods and services continued to indicate weakness with a drop of 3.5% year-on-year. Every export sector in Chile is weak, signifying that Chile has not been able to take advantage of the improvement in global economic activity, noted Wells Fargo in a research report.

It will be interesting to see how the Chilean political system handles this new economic environment, which is not something they have had to deal with in several decades.

 

 

 

 

 

 

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