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Activity continues to surprise positively at the margin.
2024/03/28 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

Positive sectoral and labor data for February continue to signal a better-than-expected start to 2024. Real retail sales (including vehicles) fell by 0.6% MoM/SA in February, only partly reverting the strong increase in January (+2.4%). In annual terms, retail sales increased 3.9% YoY (+1.8% in January), above market expectations and our call (BBG: 3.5%; Itaú: 1.1%). Separately, manufacturing rose by 0.7% MoM/SA, building on the 1.3% rise in January, and corresponding to a 8.8% YoY increase (+6.5% previously), exceeding the Bloomberg market consensus (5.2%) and our forecast (5%). Volatile mining posted a sequential contraction of 1.0% MoM/SA (+3.1% in January), leading to a 7.7% YoY increase (+1.2% in January). As a result, industrial production (grouping manufacturing, mining, and utilities) was flat on a monthly basis (SA), consistent with a 7.9% YoY rise (+3.7% in January). The large annual variations are in line with the seasonal gain of having an extra working day due to the leap year effect for 2024. Our Imacec call points to a 3.3% YoY increase (April 1, 2.3% in January), with risks tilted to the upside. While February is boosted by an additional working day, March will see the reverse effect given three fewer working days compared to 2023.



Activity momentum improving. Durable retail sales rose 5.4% YoY in the quarter ending in February (-0.1% in 4Q23), while non-durables grew by 0.1% (-4.2% in 4Q). Total retail sales increased by 1.1% during the quarter, returning to positive ground for the first time since June-2022 (-3.4% in 4Q; -7.5% in 3Q). Manufacturing increased 4.3% YoY during the quarter (+3.8% in 4Q), while mining rose 1.2% (-2.1% during 4Q), resulting in total industrial production rising 2.6% (0.6% in 4Q). In seasonally adjusted terms, retail sales increased 9.8% qoq/saar, while manufacturing rose by 3% qoq/saar. Overall industrial production fell by a mild 0.5% qoq/saar. 


Activity continues to surprise positively at the margin, reinforcing our upside bias to our 1.7% growth call for this year. Lower interest rates and inflation, along with the sequential employment gains and upbeat real wage growth should support a private consumption-led recovery this year. Of note, we expect a partial reversion of the strong February data during March, as a result of three fewer working days. In sum, the combination of improving growth and employment dynamics, along with large upside inflation surprises at the start of the year and the expected effect on prices from the CLP depreciation have led us to expect a smaller rate cut of 75bps (100bps in January) to 6.5% at next week’s monetary policy meeting.