Itaú BBA - CHILE - Recovery platform in place

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CHILE - Recovery platform in place

May 7, 2018

Imacec grew 4.6% YoY in March, above expectations.

The Chilean recovery advanced in the first quarter of 2018, boosted by a temporary mining production increase, but core activity is showing favorable signs. The 4.0% growth rate recorded in the quarter (2.5% in 4Q17) is the highest since 3Q13. After correcting for seasonal and calendar effects, growth in the quarter was 5.0% (3.3% in 4Q17), the most elevated since 3Q12. While the strong growth figures all but close the door to rate cuts, hikes are not on the horizon as inflation is likely to stay below the central bank’s 3% target for some time.

The March Imacec (monthly GDP proxy) surprised to the upside. The 4.6% annual growth was superior to the Bloomberg market consensus of 3.9% and our 4.0% call. The 31.7% (19.4% in February) mining rise was the growth engine in the month, while commerce and services lifted non-mining activity to 2.9% (2.8% in February). The month of March was penalized by two fewer working days. Therefore, activity was even more impressive once adjusted for calendar effects, rising 6.1% (with the improvement explained by the non-mining component). In 1Q18, mining activity rose 19% (6.8% in 4Q17), as there was a 17.4% drop in 1Q17 when the largest copper mine in Chile experienced the impact of an extended labor strike. Meanwhile, non-mining activity growth ticked up to 3.8%, from 3.0% in 4Q17, once adjusted for seasonal and calendar effects. Recovering core activity is consistent with improving labor market data, optimistic private sentiment, low inflation and an expansionary monetary policy. 

Beyond base effects, activity is also performing well at the margin. Imacec gained 0.5% from February leading to growth accelerating to 4.6% qoq/saar in 1Q18, after a 2.7% print in 4Q17. The non-mining activity also improved to 4.6% qoq/saar, from 3.6% in 4Q17. Meanwhile, mining production recovered to 1.9% qoq/saar (-7.4% in 4Q17).

We see GDP growth of 3.6% this year, more than doubling the 1.5% posted last year, as external and domestic tailwinds support the Chilean recovery.

Miguel Ricaurte
Vittorio Peretti

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