Chile’s industrial production rose less than expected in September as some manufacturers continue to rebuild after the February earthquake and the peso’s gains reduce export revenues.
Output expanded 3 percent in September from a year earlier, the National Statistics Institute said in a report today, compared to the 6 percent median forecast of 17 economists surveyed by Bloomberg. Industrial sales rose 5.9 percent, the institute said, beating the 2 percent median forecast of five economists. Retail sales jumped 17.7 percent and supermarket revenue expanded 10.5 percent.
Chile’s productive capacity hasn’t fully recovered from the February temblor, which caused an estimated $30 billion in damage, the institute said. The gap between actual and potential output is on track to close toward the middle of next year, which will create inflationary pressure that concerns policy makers at the central bank, Matias Madrid, chief economist at Banco Penta in Santiago, said today.
“That’s why the central bank has to continue raising rates,” Madrid said in a telephone interview. “The bank will do so by a quarter point so it doesn’t impact the exchange rate too much.”
Policy makers have increased interest rates in their last five monthly meetings. At 2.75 percent, Chile still has the lowest overnight lending rate of the seven Latin American economies tracked by Bloomberg.
Policy makers in November will boost rates by a quarter-point for the second straight month after raising them by a half-point in the four previous meetings, according to the median estimate of 49 traders and investors in an Oct. 27 central bank survey. Chile’s annual inflation rate, which was 1.9 percent in September, will reach 3.3 percent in 12 months, the survey said. Policy makers target inflation of 3 percent.
Chile’s peso has gained 7 percent against the U.S. dollar in the last three months, beating out the six other Latin American currencies tracked by Bloomberg. The peso strengthened 1.1 percent to 489.39 per U.S. dollar at 2:03 p.m. New York time.
The peso’s gains have cut the cost of imports, motivating Chileans to buy more durable consumer goods like automobiles and domestic appliances, Madrid said. Exporters have lost revenue because of the weak dollar, he said.
Paper and Plastic
Output of paper, plastic and metal products fell in September, partially offsetting gains in textile, furniture and food and beverages, the institute said. The construction industry is showing signs of improvement after building permits rose 10.8 percent in September from the previous year, it said.
Industrial production has grown at a slower pace than economic activity since the 8.8-magnitude earthquake smashed ports, roads and factories. Industrial output grew 6.9 percent in August, 3.3 percent in July and 1.9 percent in the second quarter, according to calculations made by Bloomberg based on institute data.
Chile’s economic activity grew 6.5 percent in the second quarter and likely exceeded 7 percent growth in the three months through September, Finance Minister Felipe Larrain told lawmakers Oct. 5. The central bank is scheduled to publish September economic output data Nov. 5.
Chile’s economy will expand 5 percent this year and 6 percent in 2011, which would make it, along with Peru, South America’s fastest growing in 2011, the International Monetary Fund said in its Regional Economic Outlook published Oct. 19.
The central bank predicts growth of 5 percent to 5.5 percent in 2010 and as much as 6.5 percent in 2011, according to its latest monetary policy report, published Sep. 8.
Internal demand has helped drive recovery and will continue to swell next year on “expansive” financial conditions, Inversiones Security economists Aldo Lema and Cesar Guzman said in an Oct. 25 note to investors.
Chile’s bicentennial celebrations may have boosted consumption in September, which had one less working day than the previous year, the institute said.
The central bank may start to sound “a little less upbeat on activity” after today’s industrial production data, Jimena Zuniga, an economist at Barclays Capital in New York, said in a note e-mailed to investors.