Itaú BBA - CHILE – Sluggish activity in February

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CHILE – Sluggish activity in February

April 5, 2019

Mining activity was affected by transitory factors

Mining posted an expected contraction in the month of February, but disappointing non-mining activity resulted in the lowest headline growth since mid-2017. Activity grew 1.4% yoy in February, below the 2.0% Bloomberg market consensus (also our call). Mining contracted 7.8% (-3.9% previously), the sharpest drop since the extensive labor strike at the country’s largest mine in early 2017, as disruptive weather hampered activity at some mines. Services remain the driver of non-mining activity, but weak manufacturing and retail sales led non-mining activity to slow down to 2.4% (2.8% previously), the weakest print since September last year. The slow activity start to the year is line with the central bank’s recent downward revisions to growth and our 3.2% forecast for 2019.  

In the quarter ending in February, activity weakened. Non-mining activity moderated to 2.8% yoy (3.7% in 4Q18), while mining declined 2.6% (+1.3% in 4Q18). As a result, Imacec increased 2.3% in the quarter (3.6% in 4Q18), the slowest pace since 3Q17.

At the margin, non-mining activity slowed but remains near potential, while mining is the key drag. Imacec gained 1.3% qoq/saar in the quarter ending in February (5.4% in 4Q18), with mining falling 14.2% qoq/saar (+12.6% in 4Q18). Meanwhile, non-mining activity slowed to 3.2% qoq/saar (4.6% in 4Q18).

Weakness in mining activity is largely due to transitory factors (in particular, bad weather) and the current level of copper prices will likely contribute to boost production ahead. Business confidence, in an environment of low inflation and expansionary monetary policy (central bank has signaled stable rates until near yearend), would also support growth this year. 


Miguel Ricaurte
Vittorio Peretti

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