Itaú BBA - CHILE – Trade deficit in July

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CHILE – Trade deficit in July

agosto 7, 2019

Weak global demand amid limited domestic demand would keep the CAD above 3% of GDP

In July, Chile recorded the first trade deficit since October last year, as imports rebounded in part due to fuel purchases. As oil prices plummet amid the recent intensification of global trade tensions, fuel imports are likely to moderate ahead. Mining exports continued to fall, but there was some recovery from manufactured good sales. Overall, a USD 29 million trade deficit was registered in July (USD 275 million surplus one year earlier), surprising to the downside given the Bloomberg market consensus of a USD 325 million surplus and our USD 200 million call. As a result, the rolling 12-month trade surplus narrowed to USD 3.4 billion, from USD 4.7 billion in 2018, USD 7.4 billion in 2017. The rolling trade balance is at its lowest level since September 2016. Additionally, our seasonally adjusted series shows a USD 3.2 billion (annualized) trade surplus in the quarter ended in July, down from USD 3.6 billion in 2Q19 and USD 5.1 billion in 1Q19.

Mining remained a key export drag in July, while food exports led the first growth of manufacturing sales since January. Total exports dropped 4.6% yoy in July, resulting in a 7.5% fall in the quarter ended in July (similar to 2Q19, -3.9% in 1Q19). Mining fell 9.3%, the sharpest quarterly decline since mid-2016. The improved performance in the month of July meant that the quarterly manufacturing drag diminished (-4.7% yoy). At the margin, exports fell 8.7% qoq/saar, some moderation from the double-digit decline in 1Q19 and 2Q19, led by manufacturing exports. 

Imports grew 0.5% yoy in July, the first positive print in the last five months, aided by the 17% rise in fuel imports and a diminished drag from consumer goods imports. Excluding fuels, imports contracted 0.5%. On the consumer goods front, the reduced drag (from -18.3% in June to -2.8% in July) was due to apparel imports returning to growth, while durable goods imports still contracted at near double-digit rates. With consumer confidence staying at low levels, private salaried job shedding and limited wage pressures, consumption dynamism is unlikely to pick up ahead. Capital goods imports in July returned to mild growth. In the quarter ended in July, total imports shrunk 6.0% yoy (7.6% drop in 2Q19; +0.1% in 1Q19), with consumption imports the key drag (-9.3% yoy), while imports of capital goods worsened to a 2.5% decline (-1.5% in 2Q19 and +2.5% in 1Q19). At the margin, imports fell 2.2% qoq/saar.

Weak global demand amid limited domestic demand would lead to a current account deficit of 3.2% of GDP this year, ticking up 0.1pp from last year.


Miguel Ricaurte
Vittorio Peretti

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