Itaú BBA - CHILE - Upside retail surprise in August

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CHILE - Upside retail surprise in August

October 3, 2019

Surprisingly upbeat August activity means growth could come in a tick above our 2.2% forecast for the year.

Activity in August, released earlier this week (Imacec), surprised sharply to the upside with growth of 3.7% and consumption data followed suit. Retail sales (including car sales) grew 2.3% yoy (1.6% in July), above the Bloomberg market consensus of 1.2% and our 0.5% call. Even afteradjusting for seasonal and favorable calendar effects, the growth of 1.6% still beat forecasts. At the margin, retail sales posted the fastest monthly gain since October last year (but was aided by two very weak prior months). The performance surprised given consumer confidence levels are entrenched in pessimistic ground and new car sales in the month declined at the severest rate since 2015. Overall, weaker wholesales led to some growth moderation (from 6.5% to 3.2%) for< strong> the index that aggregates retail, vehicles and wholesales.

The slowdown of machinery and equipment wholesales, in conjunction with declining imports of capital goods, deteriorating business confidence in the construction sector and slowing commercial loan growth, hint that investment is unlikely to recover significantly ahead. The 3.2% yoy growth of commercial activity in August was still led by the 4.5% wholesales rise, but growth of the latter was down from 11.8% in July and the slowest rate recorded this year. Machinery and equipment wholesales grew 2.2%, versus the 14% average in the first seven months of the year. In the rolling-quarter, commercial activity still grew an elevated 3.8% (3.2% in 2Q19). Wholesales growth was stable at 7.3%. Meanwhile, retail sales increased a mi ld 0.9% yoy in the quarter (0.5% in 2Q19) as durable goods sales declined 1.7% yoy (-1.0% in 2Q19), while non-durable sales improved to 1.7% yoy (0.9% in 2Q19). At the margin, despite the notable MoM gain, retail sales (including vehicles) momentum in the quarter slowed to 1.6% qoq/saar (3.7% in 2Q19).

The surprisingly upbeat August activity means growth could come in a tick above our 2.2% forecast for the year (4% last year). It will be key to see if this is a one-off boost, driven by front-loading ahead of September’s independence celebration and payback following the conclusion of labor stoppages in July. Nevertheless, despite a still diminished impulse from abroad, the added monetary and fiscal stimulus measures would likely aid some recovery ahead.


Miguel Ricaurte
Vittorio Peretti


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