Peru Growth Slowed in First Quarter as Metals Slump Hurts Demand

Peru’s economy grew at the slowest pace in a year in the first quarter as falling copper prices caused exports and private investment to ease in the world’s third largest producer of the metal.

Gross domestic product rose 4.8 percent from a year earlier, compared with a revised 6.9 percent expansion in the fourth quarter, said the country’s statistics agency in an e-mailed report. Growth matched the 4.8 percent median estimate of seven analysts surveyed by Bloomberg.

Deceleration in China has caused copper, which accounts for a quarter of Peru’s exports, to drop as much as 14 percent this year. The central bank cut reserve requirements to a four-year low last month after retail and construction output slowed. The economy will pick up in the second half of 2014 as business confidence rises, Adrian Armas, the central bank’s research director, said May 9.

South America’s sixth largest economy has expanded less than 5 percent in two of the past five quarters after growing an average 6.3 percent in the past decade, the fastest in South America.

Mining output rose 4.7 percent in the first three months of 2014, the slowest pace in a year, while retail expanded 5.2 percent, construction gained 5.3 percent and manufacturing climbed 2.9 percent.

While there are signs the economy is poised to accelerate, March’s weaker-than-expected expansion has increased the probability of a rate cut, said BBVA Banco Continental in a May 15 note to clients.

The central bank held its key rate at 4 percent for a sixth consecutive month at its May 8 meeting.

Economic activity rose 4.9 percent in March from a year earlier, the agency said May 15. The median estimate of analysts surveyed by Bloomberg was for a 5.9 percent increase.

The agency also revised Peru’s 2013 GDP growth to 5.8 percent from 5.6 percent, the third upward revision this year, reflecting changes to methodology and industry weighting.

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