Peru GDP Rebounds as Central Bank Considers Rate Increase

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Peru’s economy strengthened in the second quarter, expanding at the fastest pace in a year, as a surge in copper output makes up for falling investment.

Gross domestic product rose 3 percent from the same period a year earlier, the country’s statistics agency said in a report posted on its website, compared with the 3.1 percent median estimate of analysts surveyed by Bloomberg. Growth accelerated from a revised 1.8 percent increase in the first quarter.

A rebound in commodities output after the biggest drop in two decades last year is pulling South America’s sixth-largest economy out of a slump, even as lower copper prices hurt investment. Monetary policy remains expansive after four rate cuts since 2013 and the central bank is considering reducing stimulus after inflation accelerated, bank President Julio Velarde said Wednesday.

“The central bank is going to tread carefully because there’s a lot of mixed signs in the non-primary sector,” said Fernando Iberico, an analyst at Inteligo SAB in Lima. “They’re preparing the market for a possible increase, even if it’s only 25 basis points, to tame inflation and ease a bit of the pressure on the currency.”

A 14 percent slide in the sol against the dollar in the past year has eroded the spending power of consumers and companies that are paying back dollar loans and has pushed inflation above the top of the central bank’s 1 percent to 3 percent target range.

The sol fell 0.1 percent to 3.26 per U.S. dollar at 1:42 p.m. in Lima, a six-year low.

Construction fell 8.7 percent in the three months to June 30 from a year earlier and manufacturing contracted 0.2 percent. Mining and retail output climbed 14 percent and 3.9 respectively.

GDP expanded 2.4 percent last year, the slowest pace since 2009, prompting the government to cut personal and corporate taxes and increase outlays on public works.

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