Chile’s economy expanded a faster-than-forecast 5.2 percent in March from the previous year on gains in the retail, corporate services and power generation industries, increasing the likelihood policy makers will raise the key interest rate this year.
The median estimate of 16 economists surveyed by Bloomberg was for the economy to expand 4.3 percent in March. The economy grew 0.9 percent in March from the previous month on a seasonally adjusted basis, the central bank said today in a report posted on its website.
The economy, as measured by the bank’s Imacec index that is a proxy for gross domestic product, expanded 5.6 percent in the first quarter from last year, according to calculations made by Bloomberg. Today’s data show internal demand continues to bolster the nation’s economy even as China slows and Europe falls into recession, economist Alejandro Puente said.
“Retail is driving this behavior strongly,” Puente, the chief economist at Banco Bilbao Vizcaya Argentaria SA in Santiago, said by phone today. “This supports the vision of more restrictive monetary policy. But we don’t think this is enough for a change just yet.”
The peso fell 0.2 percent to 483.95 per U.S. dollar at 9:41 a.m. Santiago time. Chile’s currency has gained 7.4 percent against the dollar so far this year, and inflation has surpassed the upper limit of the central bank’s 2 percent to 4 percent target range in three of the past four months.
Traders and investors polled April 24 by the central bank were split on whether policy makers would raise interest rates within six months, while most expected a quarter-point gain to 5.25 percent within one year.
Policy makers, who have kept the key rate unchanged for three straight months, may increase in the second half of this year in light of domestic demand growth and a “tight” labor market, Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc., said in a note e-mailed to investors today.
Chile’s unemployment rate fell to 6.6 percent in the three months through March from 7.3 percent in the same period of 2011. Wages grew 6.6 percent in March from last year, the National Statistics Institute said in a report posted on its website today. Retail sales expanded 9.2 percent over the same period.
To be sure, economic growth will slow this year on lower gains in exports and investments, and increases in the consumer price index will ease, Mario Arend, chief economist at Celfin Capital SA, wrote May 2.
“Even though recent months’ inflation readings have shown some core inflation persistence, we believe the economy is not overheating,” Arend wrote in a report for investors. “With our forecasts for slowing growth rates in coming months, we do not foresee any major sources of price pressure on core CPIs this year.”
Exports in the world’s top copper producer will climb 4.3 percent in 2012 after growing 4.6 percent last year as the average price of copper dips to $3.67 a pound from $3.99 in 2011, according to Celfin forecasts. GDP growth will slow to 4.6 percent this year from 6 percent in 2011, it said.
Chile had a trade surplus of $1.05 billion in April, with exports declining 4.9 percent to $6.9 billion from the year earlier and imports climbing 4.5 percent to $5.85 billion, the central bank said in a report posted on its website today.
The Andean nation exported $3.58 billion of copper in April.
The median estimate of 12 economists surveyed by Bloomberg was for a trade surplus of $650 million.