Itaú BBA - CHILE – Weak consumption in 2Q19

Macro Latam

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CHILE – Weak consumption in 2Q19

agosto 2, 2019

Low private confidence, a volatile external scenario, contained copper prices, and a weak labor market have resulted in an activity slowdown in 1H19

Retail activity disappointed in June, anticipating a weak consumption in the second quarter of the year. Retail sales (including car sales) contracted 0.9% YoY, coming in below our +0.2% forecast and the Bloomberg market consensus call of 0% (+3.3% in May). Car sales were the main drag, but other retail sales were weak, too. Meanwhile, the index which aggregates retail, vehicles and wholesales expanded 1.9% (5.4% previously), lifted by still dynamic wholesales. The deterioration in private sentiment is hurting retail activity, which alongside disappointing industrial indicators, are behind our 1.7% forecast of the monthly GDP proxy for June (IMACEC, to be released on August 5), a slowdown from the 2.3% recorded in May.

Commercial activity in 2Q19 was lifted by wholesale trade. The 3.3% YoY growth in commercial activity was stable from 1Q19 (5.0% in 2018), supported by improving wholesales (+7.3% from 5.7% in 1Q19). A positive note comes from the still dynamic sales of machinery and equipment, which constitutes a mitigating factor to falling production of these items as reported in industrial production data earlier this week. Meanwhile, retail sales underperformed (+0.6% YoY, +0.4% in 1Q19) amid shrinking sales of cars and parts (-3.4% in 2Q19, after +3.8% in the previous quarter). Overall, durable sales continued to shrink in the quarter (-0.9%) after expanding 11.2% in 2018, while non-durable sales expanded at a low pace (+1% in 2Q19; 1.9% in 2018).

At the margin, retail sales improved in 2Q19, but follows a weak first quarter. Retail sales including vehicles retreated 1.2% MoM in June, but in the quarter momentum improved to 3.7% qoq/saar, from -5.1% in 1Q19.

The growth outlook remains fragile. Low private confidence, a volatile external scenario, contained copper prices, and a weak labor market have resulted in an activity slowdown in 1H19 (to 1.8%, from 3.1% in 2H18). As uncertainty persists, we expect only a mild improvement in the second half of the year, with full year growth coming in at 2.4%. A slower output gap narrowing than expected by the central bank will lead to additional easing before yearend (we see policy rate ending this year at 2%).


Miguel Ricaurte
Vittorio Peretti



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