Itaú BBA - CHILE – Consumption slows in 1Q19

Macro Latam

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CHILE – Consumption slows in 1Q19

mayo 3, 2019

Despite low inflation and an expansionary monetary policy, private consumption related activity is weakening

Retail activity remained weak in March with growth coming in below market expectations. Retail sales including vehicles grew 0.7% over twelve months, below the Bloomberg market consensus and our call of 1.0% as vehicles sales slowed sharply. The weak growth follows the downwardly revised 0.1% increase in February (0.7% initially). Meanwhile, wholesale trade continued to drive commercial activity, as sales of investment-linked materials (machinery, equipment and construction materials) remain robust. Overall, the subdued retail activity, along with industrial production contracting for the third consecutive month point to another weak Imacec print (monthly GDP proxy). We expect growth of 1.7% yoy in March (1.3% in February), resulting in sluggish start to the year (1.7% in 1Q19 versus 3.6% in 4Q18).

In the first quarter of the year, the sectorial data indicates slowing consumption, while investment is likely driving the economy. The commercial activity index – which aggregates retail activity, wholesales and vehicle sales – grew a strong 3.3% in 1Q19, ticking down from the 4.0% in the final quarter of 2018. Wholesales accelerating to 5.7% (5.1% in 4Q18) partly offset the slowdown of retail sales (excluding vehicles) to 0.5% in the quarter (1.5% 4Q18). Wholesales was lifted once more by the investment-related machinery and equipment sales (11.7% in 1Q19, from 10.2% in 4Q18), while wholesales of construction materials also picked up.

At the margin, retail activity slowed sharply. Retail sales (including vehicles) contracted 5.5% qoq/saar, after expanding 8.2% in 4Q18, despite a month-over-month expansion in March.

Despite low inflation and an expansionary monetary policy, private consumption related activity is weakening (in line with the drop is confidence levels). Overall, we see activity growing a milder 3.2% this year (from 4% recorded last year), as slowing consumption is only partly offset by improving investment.
 

Miguel Ricaurte
Vittorio Peretti



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