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Commerce activity trends down.
01/06/2023 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra.

The monthly GDP proxy (IMACEC) contracted 1.1% over twelve months in April (1.9% drop in March), with a mining rebound (+3.1%) offset by a significant commerce contraction (-7.7%) and milder other services pull (0.4%). The annual contraction was broadly in line with our 1.2% call, while deeper than the Bloomberg market consensus of a 0.5% fall (central bank analyst survey: -1.0%). In monthly terms, activity was flat from March (SA), as volatile mining rebounded with sequential growth of 3.9%. Nevertheless, non-mining IMACEC fell 0.7% sequentially (SA; the first fall since December). Services ex-commerce fell 0.4%, while commerce fell 2.4% (SA). With inflation expectations converging to the target, weakening labor market dynamics, and core activity contracting, all broadly in line with the central bank’s scenario, we believe rate cuts will likely begin in 3Q22 (July).


After a transitory boost in 1Q23, activity is set to weaken this quarter. Activity fell 1.1% yoy during the quarter ending in April (0.6% drop in 1Q23), with non-mining contracting 1.0% (0.6% fall in 1Q), as the services (excluding commerce) pull eased to 0.9% (+1.4% in 1Q23), while the commerce drag increased to 5.0% (-3.8% in 1Q). Manufacturing contracted 0.9% (0.1% drop in 1Q). At the margin, total activity increased 1.8% qoq/saar (slowing from the 2.9% rise in 1Q22), as an improved mining performance at the start of 2Q was offset by a deceleration of non-mining activity to 2.9% qoq/saar (+4.5% in 1Q).   


Business sentiment remains downbeat, while imports of capital goods continue to signal investment weakness. Think-tank ICARE’s business confidence during May came in at 41.4 points (50 = neutral; broadly stable from April), around 9pp below average levels prior to the social unrest and pandemic. Non-mining business sentiment is even weaker. Overall, business sentiment completed 15 months in pessimistic ground. Imports of capital goods during April and half of May are flat over twelve months, signaling that an investment pickup in the near term is unlikely.


Non-mining activity weakness is set to continue, driven by the absence of household savings buffers, downbeat business sentiment and tight monetary policy. We expect a GDP contraction of 0.4% this year (2.4% last year), below the Central Bank’s expectation of 0% (mid-point of their range).