Chile's Economy Expands 6.5% in September, Beating Economists' Estimates

Chile’s economy expanded more than forecast in September led by growth in the retail, transport and communications industries.

Economic activity, as measured by the Imacec index, a proxy for gross domestic product, increased 6.5 percent from the same month a year earlier, the central bank said in a report distributed in Santiago. The median estimate of 17 economists surveyed by Bloomberg was 6.4 percent.

Economists had expected a slower pace of economic growth after industrial production in September increased less than anticipated and because mining output contracted in the month, Alejandro Puente, an economist at Banco Bilbao Vizcaya Argentaria SA, said. Today’s data bolsters expectations for a sixth straight rate increase this month to prevent economic growth from creating inflationary pressure, Puente said in a telephone interview from Santiago.

“The central will once again increase interest rates by a quarter point precisely in anticipation of inflationary pressure that has been incubating,” Puente said. “The decreasing unemployment rate and very strong internal demand growth could cause inflation to accelerate in coming months.”

Policy makers have increased the benchmark interest rate to the current 2.75 percent from a record low 0.5 percent, including last month’s 0.25-point increase. The bank will continue to remove the monetary stimulus at a pace that depends on economic conditions, policy makers said in a statement accompanying their decision in October.

Stronger Peso

Chile’s peso strengthened 0.5 percent to 477.60 per U.S. dollar at 12:57 p.m. local time. The peso has gained 7.9 percent against the dollar in the past three months, beating six other Latin American currencies tracked by Bloomberg.

Chile’s economy has grown on increased investment and consumption of consumer and durable goods, which reflects improved optimism in the economy, Finance Minister Felipe Larrain said today.

Data such as an increase in building permits suggest the construction sector, which has been slow to recuperate from a February earthquake, is recovering, he told reporters in Santiago.

Less Working Days

Chile had one less working day in September from the previous year, which can shave about 0.6 percentage point from the growth figure, Larrain said. The economic growth data also reflects a low base of comparison, as Chile suffered its worst recession in more than a decade in 2009, he said.

The economy expanded 0.4 percent in September from the previous month on a seasonally-adjusted basis, the bank said in today’s statement.

Economic activity rose 7.1 percent in the three months through September from last year, which would be the fastest quarterly expansion since 2004, according to Bloomberg calculations based on central bank data.

The economy grew 1.5 percent in the first quarter and 6.5 percent in the three months through June.

The central bank estimated in its latest quarterly monetary report that the economy will expand as much as 5.5 percent in 2010, which would be the most since 2005.

Internal demand may grow 16 percent this year as imports rise 26 percent and exports shrink 0.3 percent, the central bank said in the monetary report, published Sept. 8.

Quake Recovery

Internal demand helped the economy recovery from the February quake, which caused activity to shrink in March, said Alberto Ramos, an economist at Goldman Sachs Group Inc.

“The post-February 27 earthquake economic recovery followed a tight V-shaped pattern,” he said in an Oct. 29 note. “The post-earthquake rebound of real activity has been nothing short of impressive.”

Industrial output has grown at a slower pace than economic activity since the 8.8-magnitude temblor. Some industries are yet to reach pre-quake production levels, the National Statistics Institute said in an Oct. 28 report.

Industrial output grew 4.4 percent in the third quarter from the previous year and 1.9 percent in the three months through June, according to calculations by Bloomberg based on the institute’s data.

To contact the reporter on this story: Randy Woods in Santiago at rwoods13@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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