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Weaker carryover into 2024.
2024/02/01 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

The monthly GDP proxy (IMACEC) contracted 1.0% YoY (+1.2% in November), well below the Blomberg market consensus of -0.2% (Itaú: +0.7%). Non-mining activity contracted 0.5% YoY (+1.0% in November). Activity in the month was dragged down by a 3.6% YoY mining drop, while commerce and manufacturing pulled down non-mining activity. Services grew 1.8% YoY (1.2% in November). On a sequential basis, IMACEC fell 1.1% from November to December (+0.4% previously), with widespread declines. Overall, the economy contracted 0.2% in 2023 (to be confirmed by National Account data), after a 2.4% growth in 2022. The print comes in below the BCCh’s and our expectation of 0%, but remains above expectations posted at the start of last year. The contraction in December will lead to a weaker carryover, of around 30bps, posing downside risks to our 1.7% growth call for this year (barring a significant bounce-back in the January data). The December activity data will likely consolidate market views that the central bank will continue with a 100bp rate cut pace at the next meeting in early April (assuming local financial market conditions do not deteriorate significantly before then).  


During the final quarter of 2023, non-mining activity advanced on a gradual recovery path. The economy increased 0.2% YoY in the quarter (0.6% in 3Q), with non-mining up 0.5% (-0.1% in 3Q; the first positive variation since 3Q22). Manufacturing (3.3% YoY ) and services (1.3%) were the key pulls in the quarter. Commerce contracted by a milder 2.1% (2.9% down in 3Q), and is expected to return to positive figures before 2S24. At the margin, IMACEC increased 0.4% qoq/saar (1.4% in 3Q), lifted by the 1.9% non-mining gain (1.2% in 3Q). 


Leading indicators continue to suggest a mild recovery ahead. Think-tank ICARE’s business sentiment showed a reduction in pessimism during January, but remains in line with the reading from August-November last year. Business confidence came in at 43.7 points (50 = neutral; 35.7 in December), with the non-mining index at 38.8 (34.9 in December). Labor hiring indicators remain downbeat. Imports of consumer and capital goods continued to contract by double-digit rates in 4Q23, while levels remains low at the start of 2024. The Credit Survey for 4Q23 shows still restrictive supply conditions, especially for large companies and in sectors such as construction and real estate, as loans contracted by 0.85% YoY in real terms in December, driven by declines in commercial and consumer loans.  


Lower interest rates and inflation will support a gradual sequential recovery in economic activity, but downbeat private sentiment, softening employment indicators will likely lead to a below-potential 1.7% growth in 2024, with risks tilted to the downside. National accounts data will be published on March 18.