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Peru August Economic Activity Expands 6.3% on Construction

Oct. 15 (Bloomberg) -- Peru’s economic growth rate held above 6 percent for a fourth straight month as surging construction activity and a rebound in manufacturing offset a drop in demand for its commodity exports.

Economic activity rose 6.3 percent in August from the same month a year earlier, following a 7.2 percent increase in July, the government’s statistics agency said today in an e-mailed report. Economists predicted growth of 6.6 percent, according to the median estimate of 10 analysts surveyed by Bloomberg.

Construction of malls, homes and copper mines and the government’s infrastructure-heavy stimulus package is fueling growth in South America’s fastest growing economy. The central bank raised reserve requirements Oct. 1 for a second straight month to prevent domestic demand fueling inflation that has been above its target range for 15 months.

“Construction is the motor of the economy,” said Hedmond Rios, an economist at Celfin Capital, in a phone interview from Santiago. “I wouldn’t be surprised to see the bank increase reserve requirements again in a bid to slow credit expansion.”

The bank is tightening money supply after credit growth expanded 17 percent in August, the strongest pace in five months, amid rising consumer demand and private investment.

Consumer prices rose 0.54 percent in September, the fastest pace in six months, which pushed the annual rate up to 3.74 percent. The central bank targets annual inflation of 2 percent plus or minus 1 percentage point.

Construction activity jumped 18 percent in August while export demand for textiles and furniture fueled a 4.1 percent gain in manufacturing, compared with a 0.8 percent gain in the first eight months of this year, the agency said.

The sol was little changed at 2.5850 per U.S dollar at 10:54 a.m. in Lima, according to Deutsche Bank AG’s local unit.

The unemployment rate in Lima fell to 6.6 percent last month, compared with 6.7 percent in August, the agency said in a separate report.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net;

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

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