Itaú BBA - CHILE – Weak retail in February, but investment indicators still strong

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CHILE – Weak retail in February, but investment indicators still strong

April 2, 2019

Low rates and a prolonged period of mild inflation would aid retail dynamism going forward.

Weak retail activity came in line with our expectations for the month of February, but negatively surprised the market consensus. Retail sales including vehicles grew 0.7% over twelve months (0% in January), well below the Bloomberg market consensus of 1.5% (Itaú: 0.8%). Meanwhile, wholesale trade remained robust, still favorably led by sales of investment-linked materials. With mining contracting in the month and retail data weak, we expect the monthly GDP proxy (Imacec) to grow below potential at 2.0% in February (2.1% previously). Despite the weak activity start to 2019, we see GDP growth at 3.2% this year (4.0% last year).

The composition of the data is an indication that investment is surpassing consumption as the activity driver. The commercial activity index – which aggregates retail activity, wholesales and vehicle sales – grew a strong 4.8% in February, up from 3.2% at the start of the year. Wholesales expanded 7.9% (4.6% in January), lifted once more by the investment-related machinery and equipment sales (19.7%, from 7.5% before). Another indicator that investment remains robust is the wholesales of construction material (3.5%, from 2.5%). Meanwhile, retail sales excluding vehicles sales grew 0.8% (from 0.4%). In the quarter ending in February, the commercial activity index rose 3.3%, down from 4.0% in 4Q18, but similar to the gain in 3Q18. Wholesales growth remain elevated near 5% (as recorded in 4Q18 and 3Q18), w hile the main drag remained retail sales (excluding vehicles) with growth of 0.8% (1.5% in 4Q18 and 0.7% in 3Q18).

At the margin, retail activity declined. Retail sales (including vehicles) decelerated to -3.6% qoq/saar, from +7.6% in 4Q18 (-3.6% in 3Q18).

Low consumer confidence levels and a lagged recovery of the labor market are hampering retail activity. Nevertheless, the central bank signaling low rates for longer and a prolonged period of mild inflation would aid retail dynamism going forward.

 

Miguel Ricaurte
Vittorio Peretti

 



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