Itaú BBA - CHILE – Weak Activity In April

Macro Latam

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CHILE – Weak Activity In April

mayo 30, 2014

The INE (National Institute of Statistics) released activity and labor market indicators for April.

The INE (National Institute of Statistics) released activity and labor market indicators for April. The numbers showed that the Chilean economy continues to weaken. Notably, manufacturing is still the main drag on the economy, while consumption indicators continue to slow. The unemployment rate fell surprisingly, but this was mostly due to a strong rise in self-employment, which does not necessarily reflect a dynamic labor market.  

Manufacturing production contracted by 4.2% year over year, below both our estimate (-2.8%) and market consensus (-2.9% according to Bloomberg), after increasing by a weak 0.5% last month (adjusted from 0.8%). According to INE, the earthquake in the North of the country and devastating fires in Valparaiso did not have a significant effect on the indicator. Utilities gained 2.0% (2.4% last month), while Mining production surged to 5.6% (0.9% in March) due to increased copper production. Consequently, the industrial production index (which aggregates mining, manufacturing and utilities) grew by 1.2% (0.9% last month). Regarding consumption related indicators, annual growth of retail sales fell from 5.2% last month to a mere 1.6% (well below our estimate of 3.4% and the market consensus of 4.4%) as annual sales of durable goods declined by 4.7%. On the other hand, supermarket sales grew a by a strong 6.7%, positively affected by the Easter holiday.

On a sequential basis, Manufacturing production performed better, but it was still weak: 0.2% month over month and 1.0% qoq/saar. Retail sales declined by 1.0% from March and by 1.2% qoq/saar.

On a separate note, the INE announced that the unemployment rate declined to 6.1% for the moving quarter ending in April, from 6.5% last month. The rate decreased by 30 bps relative to one year ago, as employment grew faster than the labor force (2.2% and 1.9%, respectively). Higher employment growth was due to self-employment, which was up by 8.8% year over year (7.4% in March). Growth in waged employment declined to 0.8% annual rate, from 0.9% last month, which together with higher inflation in April will likely further reduce the growth in the real wage bill.

Considering today’s numbers, we expect a 2.0% increase in April’s Imacec (monthly proxy of GDP). Our 3.3% growth forecast for this year has a downward bias.

João Pedro Bumachar

Vittorio Peretti

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