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UPDATE 2-Poor factory output, retail sales data flag worsening Chile economy
May 30, 2014 / 3:06 PM / 3 years ago

UPDATE 2-Poor factory output, retail sales data flag worsening Chile economy

(Adds Reuters poll forecast for April growth, analyst's
comments on interest rate)
    SANTIAGO, May 30 (Reuters) - Chile's government published
worrying data on Friday showing the economy is under continued
pressure, as factory output fell much faster than expected and
retail sales grew at their slowest pace in over five years.
    Slowing investment alongside cooler growth in Chile's top
trade partner, China, have weighed on the economy of the world's
top copper producer.
    Manufacturing production fell 4.2 percent in
April from a year earlier due to one fewer working day and a
drop in the production of foods and certain metal products used
in mining, the government's INE statistics agency said.
    That compared with a Reuters poll for a 2.4 percent
    Even Chile's enthusiastic shoppers seem to be increasingly
staying at home. Retail sales, a good measure of consumption and
one of the main motors behind Chile's economy, grew by a weak
1.6 percent in April versus a year ago.
    That was the weakest month of year-on-year growth since at
least January 2009, the year Chile fell into a recession, INE
data showed.
    "The deceleration in retail sales is occurring in a
situation of lower expectations for consumption and a lower
total wage bill ... with a more restrictive consumer credit
market and reduced demand for credit," the government agency
    According to the median response of 13 analysts and
economists surveyed by Reuters after the data was released, the
IMACEC economic activity index is seen rising 2.5
percent in April, the slowest pace of growth since January.
    The government expects economic growth in 2014 of 3.4
percent, compared with 4.1 percent last year. 
    The jobless rate for the February to April
period was a bright spot, unexpectedly falling to 6.1 percent,
INE said, below market forecasts for an increase to 6.6 percent.
But analysts put that down to a technical blip and said the
overall trend would likely continue to rise. Unemployment was
6.5 percent in the first quarter.
    In an effort to stimulate the flagging economy, Chile's
central bank has cut the benchmark rate by 100
basis points since October to 4.0 percent. But a sudden rise in
inflation, mostly due to depreciation of the peso currency
, has stayed its hand at the last two meetings.
    "The tight labor market, rapidly growing nominal wages, and
accelerating inflation reduce the maneuvering room for a central
bank that is inclined to ease policy further to help the economy
adjust to a lower-growth environment," said Tiago Severo,
economist at Goldman Sachs.

 (Reporting by Santiago newsroom; Writing by Anthony Esposito;
editing by Sofina Mirza-Reid and Matthew Lewis)

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