Itaú BBA - CHILE – Mining-led growth in February
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CHILE – Mining-led growth in February

March 29, 2018

Manufacturing grew firmly but came in below market expectations

As expected, mining led industrial production in the month of February. Mining encountered a low base of comparison given the extensive labor strike early last year (a feature that will persist for the coming months). Nevertheless, mining production picked up at the margin for a second consecutive month, boosted by elevated copper prices. Manufacturing grew firmly but came in below market expectations, dragged down by the paper production component. Signs of recovering internal demand and strengthening global growth will likely aid a manufacturing improvement ahead. 

Industrial production – which aggregates mining, manufacturing and utilities – grew 8.9% year over year in February (5.2% in January). Mining rose 16.9%, following on from the 5.8% at the start of the year, while manufacturing increased 3.7% (5.7% in January). The latter came in below the Bloomberg market consensus of 5.9% and our call of 6.0%. Manufacturing and utilities together contributed 2.1 percentage points to the total industrial production variation (8.9%), while mining production dominated in the month. For the quarter ending in February, industrial production grew 4.5%, up from the 2.1% in 4Q17 and the 2.8% in 3Q17. The improvement is led by mining (to 7.9% from 4.9% in 4Q17), however, manufacturing is also performing favorably (2.1% vs. 0% in 4Q17). 

At the margin, activity is accelerating. Mining production fell 0.5% qoq/saar, a notable improvement from the 7.2% drop in 4Q17. Meanwhile, manufacturing accelerated to 3.7% qoq/saar, from 2.0% in 4Q17 and utilities picked up to 8.1% qoq/saar (-11% in 4Q17). Overall, industrial production increased 1.0% qoq/saar (-3.9% in 4Q17).

We expect strong external demand, high copper prices, low interest rates and low inflation amid increased confidence to support an activity recovery this year. The 1H18 will be led by elevated mining growth rates. Given the industrial production indicators, we preliminarily expect the February Imacec (monthly GDP proxy) to rise close to 4.5% (to be released on April 4). Overall, we see GDP growth of 3.6% this year, more than doubling the 1.5% posted last year.

Miguel Ricaurte
Vittorio Peretti

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