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Activity off to a strong start to the year.
2024/02/29 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

Following a weaker end to 2023, and the positive surprise in labor market data yesterday, activity indicators started off the year on a better foot. Real retail sales (including vehicles) rose 3.1% MoM/SA in January (+0.7% previously). In annual terms, retail sales increased 2.2% YoY (-1.5% YoY in December), the first positive print since April 2022 following a sustained private consumption adjustment given tight monetary policy and high inflation. The positive print was well above market expectations (BBG: -1.4%; Itaú: -1.8%). Separately, manufacturing rose by 1.2% MoM/SA (-0.5% in December), consistent with a 6.5% YoY increase (-2% previously), exceeding the Bloomberg market consensus (1.6%) and our forecast (2.0%). Volatile mining rebounded with sequential growth of 3.0% MoM/SA, leading to a 1.1% YoY increase (-3.8% in December). As a result, industrial production (grouping manufacturing, mining, and utilities) rose 3% MoM/SA and 1.1% YoY (-3.8% in December). Given the widespread upside surprise, we revised our January IMACEC call up by 110bps to +0.8% YoY.


Activity gains momentum. Durable retail sales rose 4.7% YoY in the quarter ending in January, back in positive ground since May 2022 (-0.1% in 4Q23), while non-durables fell 2.0% (-4.2% in 4Q). Total retail sales dropped by a mild 0.7% during the quarter, continuing to post smaller contractions from previous periods (-3.4% in 4Q; -7.5% in 3Q). On the other hand, manufacturing increased 3% (+3.8% in 4Q), while mining dropped a mild 0.4% (-2.1% during 4Q), resulting in total industrial production rising 1.1% (0.6% in 4Q). In seasonally adjusted terms, retail sales increased 12% qoq/saar (building from the 10.1% increase in 4Q), while manufacturing rose by 3.7% qoq/saar (+9.2% in 4Q23). Overall industrial production increased 0.8% qoq/saar (+1.1% in 4Q).  


Lower interest rates and inflation, along with an improvement in labor market data, should should support a gradual recovery this year, primarily driven by private consumption, as investment should remain weak. We expect GDP growth to rebound to 1.7% from an 0.2% contraction in 2023. The BCCh will release the monthly GDP proxy (IMACEC) for January (+0.8% expected; -1% in December) on March 1. The BCCh will publish revised national accounts data on March 18.