Chile’s April Growth Disappoints as Rebound Runs Out of Steam

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Chile´s economy grew less than analysts expected in April as a much heralded rebound lost momentum, two days after the central bank warned that weak consumer and business confidence were damping expansion.

The Imacec index, a proxy for gross domestic product, rose 1.7 percent from a year earlier, the National Statistics Institute said on its website Friday. The median forecast of 23 economists surveyed by Bloomberg was for growth of 2.3 percent. In the month, the Imacec was unchanged.

“The result is awful,” Benjamin Sierra, financial markets economist at Scotiabank in Chile, said by phone. “We have confirmation that the second quarter will be worse than the first.”

The central bank unexpectedly cut its economic growth forecast this week and said increased fiscal spending and expansionary monetary policy had “done their job” and couldn’t do much more. After expanding at the slowest pace in five years in 2014, a further rebound in the economy would largely depend on improved business and consumer confidence, said policy makers, who have left the key rate unchanged at 3 percent since November.

There are no signs of that recovery yet, with business confidence falling to 46.45 in May from 48.48 in April. Wage growth tumbled to 6.4 percent in April from 7.1 percent the month before, according to a separate report released by the statistics agency Friday.

Central bank board member Joaquin Vial told Pulso newspaper Friday that a slowdown in inflation and wage growth “could delay the withdrawal of stimulus.”

Disappointing Dynamism

Interest-rate swap prices suggest traders expect the central bank to raise rates in December and again in May, according to Bloomberg calculations. The one-year swap was unchanged at 3.15 percent today.

“The recovery of the economy in the second half is based on a significant improvement in confidence indicators, which hasn´t happened yet,” policy makers said Wednesday. “If this situation is prolonged, it´s possible that domestic spending and activity won´t show the greater dynamism expected in the base scenario.”

The bank cut its 2015 growth forecast to between 2.25 percent and 3.25 percent from 2.5 percent to 3.5 percent in its quarterly monetary policy report.

Finance Minister Rodrigo Valdes warned against drawing too many conclusions from one-month’s growth. While saying that the government was not satisfied with April’s figure, Valdes said people should not overreact.

Manufacturing unexpectedly rose for the first time in three months in April, while retail sales also increased more than expected, the statistics agency said May 29. Manufacturing gained 0.8 percent from the year earlier, while retail sales gained 3.3 percent.

Growth in the world´s largest copper producer will accelerate to 2.9 percent this year, exceeding the Latin American average by more than 2 percentage points, according to economists surveyed by Bloomberg.

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