Itaú BBA - CHILE – Consumption decoupling from investment, for now

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CHILE – Consumption decoupling from investment, for now

junio 3, 2019

The increasingly complex external scenario is resulting in growing domestic uncertainty

Retail sales in April contracted by more than expected, dragged down by durable good sales, suggesting that the sluggish activity start to the year likely persisted into 2Q19. Retail sales including vehicles fell 0.8% over twelve months (+0.9% in March), below the Bloomberg market consensus (-0.6%) and our call of a 0.3% drop. Meanwhile, wholesale trade continued to drive commercial activity, as sales of investment-linked materials (machinery, equipment and construction materials) remain elevated. Overall, the bounce-back of mining production in the month (reported on May 31) is unlikely to offset the subdued retail activity and weak manufacturing, resulting in another weak Imacec print (monthly GDP proxy). We expect growth of 1.9% yoy in April (1.8% in March), leading to below-potential growth of 1.7% in the first third of this year (5.2% in the 2018 comparable period).

In April, automobile and part sales shrunk 5.8% (-1.3% previously), but the remainder of retail sales was also weak (-0.6% yoy vs. +1.4% in March). The 2.3% growth of the commercial activity index – which aggregates retail activity, wholesales and vehicle sales – was boosted by the 7.6% rise of wholesales (5.1% in March; 6.2% year-to-date). In the quarter ended in April the commercial index grew 3.1% (4% in 4Q18), driven once more by the wholesale of investment-related machinery and equipment sales (21.2% yoy in March and 16.3% in the quarter), while wholesales of construction materials grew a broadly stable 2.2%. Meanwhile, retail sales (including vehicles) grew a mild 0.1% (2.9% in 4Q18). Thus, data point at diverging consumption and investment dynamism.


At the margin, retail activity continued to slow. Retail sales (including vehicles) contracted 0.2% qoq/saar, a milder contraction than in 1Q19 (-5.8%), but far inferior to the 8.2% expansion in 4Q18.

The increasingly complex external scenario is resulting in growing domestic uncertainty. In fact, think-tank ICARE’s May business confidence results show commerce confidence (52.2 points; 50 = neutral) is down to its lowest level since 2017. Despite the escalating trade war, mining confidence remains upbeat (65 points) and is the only reason to keeping aggregated confidence in optimistic ground (at 50.1 points). Excluding mining, total confidence sits at 47.2 points (49.8 in April and 53.4 one year earlier) as both the construction and industrial sub-index deteriorated.

Growing headwinds put a downside risk to our 3.0% growth outlook for this year (4% last year). The global and domestic slowdown amid contained inflationary pressures reopens the door to discussing additional monetary stimulus.


Miguel Ricaurte
Vittorio Peretti

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