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Activity is recovering at the margin.
2023/12/29 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

Activity indicators in November are in line with another positive IMACEC print, while employment growth dynamics surprised positively, albeit lifted by self-employment and public posts. Retail sales (including vehicles) fell 0.5% MoM/SA in November, unwinding part of the 1.6% prior rise. In annual terms, real retail sales contracted by 2.4% YoY (-6.7% YoY in October), the mildest contraction since April 2022 as the private consumption adjustment has neared completion following a sustained period of tight monetary policy and high inflation. The negative print was smaller relative to the market consensus of -3.6% and our call of -3.5%. Separately, manufacturing fell 1.6% MoM/SA (+3.5% in October), consistent with a 4.5% YoY increase (+9.4% previously), below both the Bloomberg market consensus and our forecast (5.1%). Volatile mining rose 1.9% Mom/SA, leading to a return to positive growth territory (+1.8% YoY, from -4.2% in October). As a result, industrial production (grouping manufacturing, mining, and utilities) increased 2.7% YoY (+2.2% in October), the largest upside pull since August 2021. Overall, the data is consistent with an IMACEC increase of 0.6% YoY with risks tilted to the upside (to be released on Tuesday, January 2; +0.3% in October). On the labor market front, employment growth surprised to the upside, pulled up by informal self-employment, while the unemployment rate (SA) continued to tick up sequentially (+10bps from October to 9.0%; 8.7% NSA, +0.8pp over one year). The return to moderate economic growth, along with weak employment growth should maintain demand side inflationary pressures subdued, and lead to further rate cuts by the BCCh during 2024. We preliminarily expect another 75bp cut in January. 

Activity is recovering at the margin. Durable retail sales fell 1.7% YoY during the quarter ending in November (-6.6% in 3Q23), while non-durables dropped 5.1% YoY (-7.7% in 3Q23). With this, total retail sales declined by 4.4%, a smaller contraction than the 7.5% drop in 3Q23. On the industrial production front, mining rose 1.0% (+3.1% in 3Q), while manufacturing increased 4.4% (rebounding from the 0.1% drop in 3Q), thus leading to a total industrial production rise of 2.5% (up from 1.2% in 3Q23). In seasonally adjusted terms, retail sales increased 6.6% qoq/saar (reverting from the 6.6% fall in 3Q23), while manufacturing rose by 6.7% qoq/saar (+1.1% in 3Q23). As a result, overall industrial production increased 6.9% (+5.2% in 3Q23).



The unemployment rate rose slightly sequentially by 0.2pp during the quarter ending in November from 3Q23 to 9.0% (SA), up from the 7.6% post-pandemic low in early 2021. Employment rose by 0.5% MoM/SA in November, increasing sequentially for the third consecutive month (+0.2% in 3Q23), while the labor force rose increased 0.6% MoM/SA (0.2% in 3Q23). The participation rate in the quarter rose to 61.5% (up 1.7pp over one year to the reach the highest post-pandemic rate; 62.5% average during 2015-19). The unemployment rate of 8.7% (NSA) came in  below the Bloomberg market consensus of 8.8% (Itaú: 9%), rising 0.8 pp from the same quarter last year (+0.9pp in 3Q23). Employment grew 2.9% YoY (2.0% during 3Q23), and was driven mainly by informal job posts (3.6% YoY; +7.4% for informal self-employment posts), while the labor force rose 3.8% (3.0% in 3Q23). In terms of economic sectors, annual job growth was lifted by healthcare, manufacturing, and public administration, while construction remains weak, but rose sequentially (+13 thousand, in line with business sentiment dynamics and possibly signaling that investment in the sector may not deteriorate further).



We expect a mild activity recovery ahead as interest rates and inflation fall, while the lagged effect of tight monetary policy is expected to see the labor market continue to loosen. Better-than-expected activity throughout the year, along with a higher growth forecast for China and lower rates lead us to expect the GDP to post a null variation during 2023, while pick up to 1.7% in 2024. Rising unemployment insurance payouts (+28% YoY in October), suggest that the unemployment rate has yet to peak this cycle.


Andrés Pérez M.

Vittorio Peretti 

Ignacio Martinez Labra