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Chile Moving at Two Speeds as Industry Lags and Retail Soars

Jan. 30 (Bloomberg) -- Chile’s industrial output grew 0.5 percent in December from a year earlier while retail sales soared 10.1 percent, complicating policy makers’ efforts to fuel growth as internal demand adds to pressure on prices.

Industrial sales climbed 0.4 percent over the same period, while supermarket revenue increased 6.1 percent, the National Statistics Institute said in a report released today. The median estimate of eight economists surveyed by Bloomberg was for industrial output to grow 1.2 percent in December.

The European sovereign-debt crisis has cut the value of Chile’s exports, while failing to damp inflation or internal demand. Gains in retail sales are causing price pressures to increase, which may reduce the scope for monetary easing this year, Jorge Selaive, chief economist at Banco de Credito & Inversiones in Santiago, said by phone today.

“This obviously complicates the central bank’s job,” he said. “These data won’t stop the rate-cutting process that already started, but it will put the brakes on reductions after March.”

Chile’s central bank lowered its key interest rate this month for the first time in more than two years, even after inflation of 4.4 percent exceeded the 4 percent upper limit of the bank’s target in December.

Policy makers will keep rates unchanged at 5 percent in February before cutting to 4.5 percent by May, according to the median estimate of 59 traders and investors in a Jan. 25 central bank survey.

The peso weakened 0.8 percent to 488.61 per U.S. dollar at 10:40 a.m. Santiago time.

Fourth Quarter

Industrial production expanded 0.6 percent in the final quarter of 2011 compared with a 2.5 increase in the third quarter, according to calculations made by Bloomberg based on institute data. Retail sales soared 9.1 percent and 9.4 percent over the same periods.

Production of food and beverages as well as paper partially offset declines in textiles and refined products in December, according to today’s report.

Mining production increased 2.8 percent in December as output of copper, Chile’s biggest export, climbed 2.2 percent from a year ago to 509,407 metric tons, the institute said.

Chile’s economy will expand 3.75 percent to 4.75 percent this year after growing an estimated 6.2 percent in 2011, the central bank said in forecasts published last month.

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

To contact the editor responsible for this story: Philip Sanders at psanders@bloomberg.net.

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