Peru’s Economy Slows More Than Expected on Construction Dip

Peru’s economy grew less than analysts expected in December, expanding at the weakest pace in three years, as a construction boom waned.

Economic activity rose 4.3 percent from the year earlier, compared with 6.8 percent in November, the government’s statistics agency said in a report issued today in Lima. The median forecast of 12 analysts surveyed by Bloomberg was for a 6 percent increase.

Growth in Peru’s construction industry, a mainstay of South America’s fastest growth rate in 2012, eased to 5.3 percent in December from 17 percent the month before, the agency said. Still, a pick-up in cement demand in January indicates that domestic demand will continue to shield the commodity-dependent economy from weak export demand this year, said Pablo Nano, an economist at Scotiabank Peru.

“December saw a dip but it doesn’t change the trend,” Nano said in a phone interview from Lima. Gross domestic product “will probably grow 6.3 percent in the first quarter. Given this pace of growth, and with inflation sitting within the central bank’s target range, for the moment there’d be no reason to alter the benchmark rate.”

Peru’s sol was unchanged at 2.5675 per U.S. dollar at 12:04 a.m. in Lima, according to prices compiled by Bloomberg. The currency has fallen 0.6 percent this year, after a 5.4 percent gain in 2012, as the central bank increased U.S currency purchases and raised reserve requirements to contain the appreciation.

Exports Tumble

Peruvian exports tumbled 16 percent in December from a year earlier and were down 1.7 percent for the whole of 2012. Cement demand rebounded last month, rising 18 percent, while electricity demand rose 6.5 percent, the agency said.

The central bank left its overnight rate unchanged for a 21st month at its Feb. 7 meeting, saying inflation will slow to 2 percent this year, the mid-point of its target range, amid stable economic growth.

December’s increase brought the growth in economic activity last year to 6.3 percent. GDP will probably expand about 6.3 percent this year, the fastest pace in South America, as exports rebound and domestic demand expands, Finance Minister Miguel Castilla said in a Jan. 26 interview.

A drop in anchovy catches caused a 47 percent drop in fishing output in December and contributed to a 2 percent fall in manufacturing as fishmeal output contracted. Retail, which rose 7 percent in December, and construction together accounted for a third of Peru’s 2012 growth, Alejandro Vilchez, the statistics agency’s head, told reporters.

Lima’s unemployment rate climbed to 6.1 percent last month from 5.6 percent in December, the agency said in a separate report issued today.

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