- Imacec index increased 2.5% from year earlier; forecast was 2%
- Exports tumble 18%, pushing the trade balance into a deficit
Chile’s economy expanded more than expected in July, led by service industries and electric utilities, while exports tumbled to the lowest level in six years in August amid a slump in copper prices.
The Imacec index, a proxy for gross domestic product, rose 2.5 percent from a year earlier, the central bank said on its website Monday, compared with the 2 percent median estimate of 20 economists surveyed by Bloomberg. In the month, the economy grew 0.1 percent. The trade balance went into deficit in August for the first time in 19 months.
The central bank cut its growth estimate last week for the sixth time since March 2013 after a rebound in the economy faltered. Policy makers forecast investment would fall for a second year, even as Chile maintains the lowest real interest rates in the Americas and the government raises spending about 10 percent. With inflation above the target range, the bank indicated it would raise rates around year end.
“Rains in July helped hydroelectric generation and it will probably happen in the first weeks of August, but it is a boost that will disappear in coming months,” said Antonio Moncado, an economist at Banco de Credito e Inversiones in Santiago. “This doesn’t mean there is an economic recovery or a significant change in the trend at all.”
Second quarter data showed a greater weakness in activity and demand, while business and consumer confidence expectations deteriorated again, policy makers said in their quarterly monetary policy report last week. The bank “expects growth to be less than anticipated in the second half.”
Exports tumbled 18 percent to $4.87 billion in August from the year earlier, with copper sales abroad also falling 18 percent to $2.42 billion. Imports slid 13 percent to $4.93 billion over the same period.
Gross domestic product will expand 2 percent to 2.5 percent this year, down from a previous estimate of 2.25 percent to 3.25 percent, the bank said.
Central bank President Rodrigo Vergara said on Sept. 3 that in the bank’s base scenario any economic recovery will be “gradual and modest.” That scenario includes a tightening of monetary policy around year-end, in line with market expectations of two quarter-point rate increases over the next 12 months and another 25-point rise in the following six months, Vergara said.
Growth in Latin America’s wealthiest nation will accelerate to 2.3 percent this year, exceeding the region’s average by more than 2 percentage points, according to economists surveyed by Bloomberg.