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We believe activity likely bottomed out.
2023/10/31 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

All sectorial data rose sequentially during September. Real retail sales (including vehicles) increased 0.4% MoM/SA in September recovering from the 0.7% MoM/SA drop in August. In annual terms, real retail sales contracted by 5.4% YoY (-9.1% YoY in August), a smaller contraction relative to market consensus of -6.4% and our -6% call; the better-than-expected retail sales print is also consistent with our view of the stabilization in private consumption. Separately, manufacturing increased 0.9% MoM/SA (3.7% in August), consistent with a 1.1% YoY drop (+0.6 %in August), above the Bloomberg market consensus (-3.8%) and our -5% forecast. Volatile mining increased by 3.9% MoM/SA, driven mainly by greater copper production and higher ore grades, leading to an annual increase of 4.3% YoY. As a result, industrial production (grouping manufacturing, mining, and utilities) increased 2.4% MoM/SA, leading to a 1.5% YoY rise (+0.3% in August). Overall, September sectorial activity data, especially in mining, led us to revise our IMACEC call from -0.4% YoY to 0.0% (to be released Thursday November 2).


Sequential momentum is increasing during 3Q23. Durable retail sales fell 7.7% YoY (-11.5% in 2Q23), while non-durables dropped 8.7% YoY (-9.6% in 2Q23). Total retail sales declined by 8.5% (11.5% drop in 2Q23). On the industrial production front, mining increased 1.7% (-1.7% in 2Q), while manufacturing decreased 1.4% (-4.5% in 2Q), thus leading to a total industrial production rise of a mild 0.1% (easing from the 3% contraction in 2Q23). In seasonally adjusted terms, retail sales contracted 9.8% qoq/saar, similar to 2Q23 (-8.6%), while manufacturing rose by 3.7% qoq/saar (-6.9% in 2Q23), and mining increased 2.8% qoq/saar (-2,8% in 2Q23). As a result, overall industrial production increased 3.3% in 3Q23 (-4.2% in 2Q23).


We believe activity likely bottomed out. Monthly sectorial data surprised positively to the upside in September, with sequential improvements across the board, led by an important rebound in mining. Separately, business sentiment improved in October, also led by mining, albeit with the aggregate index still in negative territory. On the demand-side, better-than-expected retail sales support the view that private consumption finally stabilized, as is hinted by imports of consumer goods and rising household confidence. A persistent sequential recovery in economic activity should be limited by the effects of a prolonged contractionary stance of monetary policy and tight global financial conditions; bank loans contracted in September by 2.98% YoY in real terms, led by declines in commercial loans (-5.74%) and consumer loans (-2.0%). We expect a GDP contraction of 0.3% this year, with a below consensus rebound to 1.5% next year.