Chile registers greater growth since January thanks to mining

Chile’s economic activity posted the highest monthly growth since January after the mining sector recovered and monetary policymakers continued to reduce borrowing costs.

Activity increased 0.6% in September compared to the previous month, according to the central bank’s Monthly Indicator of Economic Activity (Imacec), a benchmark for gross domestic product (GDP).

The figure contrasts with the median estimate of analysts surveyed by Bloomberg, of 0.2%. The index remained unchanged from the same month a year earlier, the central bank reported Thursday.

Economists consulted by Reuters expected a drop of 0.8% for the month, while a survey of analysts prepared by the Central Bank forecast a decline of 0.6%. In August, the Imacec had fallen 0.9%.

“The Imacec result was explained by the growth of mining and other goods, offset by the falls in services, commerce and industry. Meanwhile, the increase in Imacec in seasonally adjusted terms was determined by the performance of mining and the rest of the goods.“said the Central Bank.

Chile is the largest global producer of copper. The non-mining Imacec decreased 1.2% in twelve months, while in seasonally adjusted terms it grew 0.2% compared to the previous month.

The Chilean economy is in a process of adjustment after the rapid recovery it experienced after the COVID-19 pandemic. The Central Bank, which carried out an aggressive increase in the interest rate to confront the advance of inflation, already began a relaxation cycle last July while, in its most optimistic scenario, it foresees zero economic growth for this year.

Contraction in sight

Chile’s economy is set to contract this year, according to private sector economists, amid a weak labor market and a moderate level of consumption and investment.

The central bank continues to ease monetary policy, although at a slower pace than earlier in the year. However, signs of stronger activity have emerged in recent days, including increases in both industrial production and copper, the country’s main export product.

Mining – which represents the main driver of growth – increased 2.9% monthly, according to the central bank. Services rose 0.1%, helped by education.

For its part, trade fell 0.7%, reflecting falls in both the wholesale and automobile segments, the monetary authority reported.

Last week, Chile’s Central Bank announced a smaller-than-expected rate cut of 50 basis points, reducing borrowing costs to 9%. In an accompanying statement, monetary policymakers cited limited dynamism in both consumption and investment.

Meanwhile, weaker consumption has helped slow Chile’s annual inflation rate to 5.1%, below the three-decade high of 14.1% recorded last year.

The Imacec index represents close to 90% of the Gross Domestic Product (GDP) of the South American country.

With information from Bloomberg and Reuters