May 6 (Bloomberg) -- Chile’s economy expanded in March at the slowest annual pace since July 2011 as manufacturing contracted, the central bank said.
The Imacec index, a proxy for gross domestic product, grew 3.1 percent from the year earlier, the bank said today on its website, less than forecast by all 16 economists in a Bloomberg survey. Their median estimate was 4.7 percent. Economic activity was unchanged from the previous month, the bank said.
Central bank President Rodrigo Vergara said on April 2 that the economy was showing the first signs of slowing on weaker internal demand and tighter credit conditions. The mounting evidence of a slowdown comes after a year when gross domestic product grew at the fastest pace in South America behind Peru and unemployment fell to a 40-year low.
“This adds to evidence that the economy is starting to slow down and probably implies that the central bank will move to a less hawkish tone and a more neutral monetary-policy outlook,” said Felipe Hernandez, an economist at Royal Bank of Scotland Group Plc in Stamford, Connecticut.
Manufacturing output fell 3 percent in March from a year earlier led by declines in tobacco, equipment and base metals, the National Statistics Institute said on April 30.
The peso gained 0.1 percent to 469.45 per U.S. dollar at the close in Santiago.
Economic growth of 5.6 percent last year was driven by investment in the mining industry and a consumer spending boom. The average wage surged 4.7 percent above inflation in December, the same month in which unemployment in Santiago dropped to 5.2 percent, the lowest since 1973, according to a study by the Universidad de Chile.
Still, with inflation below the target range for the past four months, the central bank chose to leave its benchmark interest rate unchanged at 5 percent in April for the 15th consecutive month, the highest in Latin America after Brazil.
All 56 economists in a central bank survey on April 9 expected policy makers to leave the key rate on hold for at least another 11 months, extending their record pause.
Even as expansion weakened last month, consumers kept spending, with retail sales leaping 10.2 percent from a year earlier, according to a report on April 30 by the statistics agency. Manufacturing output fell by 3 percent over the same period.
Industrial growth has stagnated, while retail sales soar, as the peso rises to its strongest level relative to trading partners for 20 years, curbing the cost of imports and making Chilean goods more expensive abroad.
To contact the reporter on this story: Sebastian Boyd in Santiago at email@example.com.
To contact the editor responsible for this story: David Papadopoulos at firstname.lastname@example.org.