Chile Jobless Rises More Than Expected as Rebound Falters

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Chile’s unemployment rate rose more than analysts expected in May, while manufacturing output fell for the third time in four months as an economic rebound loses traction.

The jobless rate climbed to 6.6 percent in the three months through May from 6.1 percent the month before, the National Statistics Institute said on its website Tuesday. That was more than expected by any of the 21 economists surveyed by Bloomberg. Manufacturing slid 3.3 percent in May from the year earlier, while retail sales gained 3.1 percent.

Central bank director Sebastian Claro said in an interview on June 22 that policy makers don’t expect “significant” growth in the next two years and that industry shouldn’t expect a “rapid recovery.” A day later, Finance Minister Rodrigo Valdes warned businessmen that growth would be worse than expected in the second half of the year.

“In the next few months and quarters we expect a strong increase in unemployment,” said Benjamin Sierra, an economist at Scotiabank Chile in Santiago. “It will be a much bigger increase than we have seen until now.”

Nine months after the government started to talk of a turning point and four months after hailing the green shoots of recovery, economic activity expanded only 1.7 percent in April from the year earlier, less than forecast by all but one of the 23 economists polled by Bloomberg. The central bank will report May’s economic activity data on July 6.

Exports tumbled 22 percent in May from the year earlier, while imports declined 19.3 percent, indicating weak growth is set to continue.

Growth Potential

Gross domestic product expanded 2.4 percent in the first quarter from the year earlier, up from 1.8 percent in the fourth quarter and a five-year low of 1 percent in the previous three months.

While the economy remains sluggish, high inflation and rising wages raise doubts over whether the potential growth is still at the 4 percent to 4.5 percent estimated by the central bank, Claro said in the interview.

“If the economy’s capacity to invest remains low, then the capacity for growth is also low,” Claro said. “Inflation levels and the situation in the labor market show that there are supply restrictions that lead to a debate over potential growth.”