CHILE – Strong activity momentum at the start of 3Q

Chile's economy grew by 18.1% YoY in July, again driven by consumption.

Andrés Pérez & Vittorio Peretti


Activity in July was boosted by continued consumption dynamism. The monthly GDP proxy (IMACEC) increased a notable 18.1% YoY in July (20.6% rise in June, revised up by 0.5pp). The annual increase came broadly in line with market expectations (Bloomberg consensus: 17.7%; Itaú: 18.0%). Activity increased 1.4% MoM/SA from June, building on the 1.8% rise in the previous month and 3.2% gain in May. Services (ex-commerce) increased 2.5% MoM/SA, while commerce also increased by a similar rate. Mining was a key drag, falling 2.2% MoM/SA amid lower ore-grade at key plants. The 18.1% annual increase of IMACEC was supported by services (+15.6% and 7.7pp contribution), in particular business services and health-related personal services. Commerce (both retail and wholesales) increased 43.5% YoY (+3.8pp, similar to in June), aided by the liquidity injection of transfers and pension withdrawals. Meanwhile, manufacturing and production of other goods (agriculture, utilities, construction) contributed a combined 3.7pp to growth. The strong activity momentum led the Central Bank to surprise the market with a 75bp hike to 1.5% yesterday, and signal a swift return to neutral levels (3.25-3.75%) by mid-1H22.

During the quarter ending in July, IMACEC increased 19.3% YoY, compared to the broadly flat growth during 1Q21 and 18.1% rise in 2Q. Additionally, sequential growth increased as mobility restrictions were significantly eased during July and significant stimulus is in place. With significant advancements on the sanitary front, an average of 6% of the population was placed under the strictest measure (compared to 50% in June; 85% in April). IMACEC rose 15.6% QoQ/Saar in the quarter, from +4.8% in 2Q and 14.6% in 1Q. The latest liquidity injection supported a commerce acceleration to 76.5% QoQ/Saar (+40% in 2Q and 9.2% in 1Q). Meanwhile, services ex-commerce rebounded with growth of 4.5% QoQ/Saar (7.9% down in 2Q).

The extension of the universal fiscal transfers towards the end of the year in the context of ample liquidity in the economy, along with the reopening of the economy at the start of 2H21, points to activity momentum remaining solid in coming months. We expect growth of 10% this year (5.8% fall in 2020), with risks tilted to the upside. A significant slowdown next year (to around 2.4%) is likely due to the expected fiscal tightening, fast withdrawal of monetary stimulus and political uncertainty, besides the fading benefit of economic reopening.

Andrés Pérez M.
Vittorio Peretti