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Poor factory output, retail sales data flag worsening Chile economy
May 30, 2014 / 5:37 PM / 4 years ago

Poor factory output, retail sales data flag worsening Chile economy

SANTIAGO (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 decrease.

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 said.

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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