Chile Economy Grows Less Than Forecast as Investment Boom Wanes

Chile’s economy grew less than analysts expected in the first quarter as a surge in investment began to ease.

Gross domestic product in the world’s top copper producer rose 4.1 percent from last year, the central bank said in a report posted on its website today. The median estimate of 11 analysts polled by Bloomberg was for growth of 4.5 percent. GDP increased 0.5 percent from the previous quarter. Investment expanded 9.6 percent from last year, compared with growth of 18.1 percent in the previous three months.

The central bank kept borrowing costs unchanged on May 16 for a 16th consecutive month as policy makers juggle the opposing pressures of a consumer spending boom and stagnant manufacturing output. Finance Minister Felipe Larrain said May 17 that manufacturing probably picked up in April, and that the growth in consumer spending wasn’t unsustainable.

Two-year interest rate swaps declined 73 basis points, or 0.73 percentage point, in the year through May 17 as traders bet policy makers will reduce interest rates a quarter-point to 4.75 percent in next month’s meeting, according to Banco de Chile. (CHILE) That still would give Chile the highest borrowing costs of major rate-setting Latin American nations behind Brazil.

Retail sales increased 9.1 percent in the first quarter, 14 times faster than manufacturing revenue, according to figures from the National Statistics Institute. Cencosud SA (CENCOSUD), Chile’s largest retailer by sales, has seen its shares fall 0.9 percent this year, while the country’s second-largest pulp producer, Empresas CMPC SA (CMPC), dropped 2.5 percent.

Imports of goods and services in the first quarter rose 8.2 percent as exports increased 1 percent, giving Chile a trade surplus of $792 million, the central bank said today. The price of copper, which accounts for more than half of Chile’s exports, fell 8.2 percent in the year through May 17.

The current account deficit was $1.69 billion, compared with estimates for a $1.8 billion deficit among analysts polled by Bloomberg.

The peso was little changed at 481.15 per U.S. dollar at 8:43 a.m. Santiago time.

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

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.

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