CHILE – Retail sales remained solid in July

Chile’s consumption-led recovery marches on, driven by another surge in retail sales

Andrés Pérez & Vittorio Peretti


The consolidation of the consumption-led economic recovery advanced at the start of 3Q21 as mobility restrictions eased and fiscal transfers to the vast majority of the population continued. With significant advancements on the health front, mobility restrictions were rapidly eased during July, resulting in an average of only 6% of the population under the strictest measure (compared to 50% in June; 85% in April). Retail sales (including vehicles) increased 4.0% MoM/SA from June, leading to a 62.2% YoY rise (+65.6% previously), broadly in line with market expectations (Itaú: 60%). Apparel (+18.3pp contribution), light new vehicles (+8.9pp), and electronic goods (+8.4pp) were key retail drivers in the month. The combination of monetary and fiscal stimuli and three partial pension fund withdrawals has led to retail sales exceeding pre-pandemic levels by more than 30% (while GDP is only +3%). On the other hand, manufacturing fell 1.8% MoM/SA from June, leading to a 11% YoY increase (+14.8% in June; Bloomberg market consensus: 10%; Itaú: 10%). The annual gain was explained mainly by the manufacturing of non-metallic products (+2.2pp contribution), in line with the reactivation of several projects as the economy reopens. Mining also declined from June, resulting in a 2.0% YoY contraction (1.0% fall previously), due to lower ore-grade at key copper plants. As a result, the industrial production index (aggregating manufacturing, mining and utilities) receded at the margin, leading to a milder YoY increase of 4.8% YoY (+6.1% in June). These activity indicators point to the July IMACEC growing 18% YoY (+20.6 previously; to be released on August 01).

Sales of durable goods continued to double in the quarter ending in July. Industrial production increased 4.8% YoY (similar to 2Q), as manufacturing rose 11.5% (+9.7 in 2Q), and mining decreased 1.5% (+0.5% in 2Q). Retail sales (including vehicles) rose 66.3% YoY in the quarter, +5.6pp from 2Q), as durable goods rose 116% and non-durable goods sales accelerated 9pp to 53.4% YoY.

At the margin, retail sales momentum accelerated in the quarter to 140.3% qoq/saar (compared to +54% in 2Q and a 11.3% drop in 1Q), while manufacturing increased a milder 1.2% qoq/saar (from +3.9% in 1Q21) and mining slowed to 2.8% qoq/saar (5.8% in 1Q21).

The swift economic reopening, recovering private sentiment and expanded fiscal aid will support activity dynamics during the remainder of the year, leading to GDP growth of 10% (5.8% decline in 2020). GFK’s consumer confidence index for August sits at 39.3 points (50 = neutral), the least pessimistic level in two years, while ICARE’s business sentiment gauge (ex-mining) increased to 60.0 points (+3.2pp from July), the most upbeat level since early 2012. Overall, the extension to universal fiscal transfers to include October and November (amounting around 2% of GDP) amid an already fast economic rebound, an improvement in the labor market, further declines in mobility restrictions, and rising medium-term inflation expectations support a swifter withdrawal of monetary stimulus. We expect the central bank to increase rates by 50bps to 1.25% later today.

Andrés Pérez M.
Vittorio Peretti