Itaú BBA - Chilean GDP proxy surprises to the upside, but outlook remains challenging

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Chilean GDP proxy surprises to the upside, but outlook remains challenging

Março 3, 2020

While the economy is rebounding from the October shock well above expectations, the outlook remains challenging

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The monthly GDP proxy (Imacec) surprised to the upside in January as the economy continues to recover from the significant shock registered at the start of 4Q19. The Imacec (SA) gain of 1.3% from December to January, led by non-mining activity (particularly services and construction), builds on the 3.5% rise at the close of 2019. As a result, activity rose 1.5% yoy in January (1.1% in December), above market consensus of 1.2% and our 1.0% call. Despite the positive dynamics at the beginning of the year, a continued momentum recovery is unlikely. While business confidence, excluding the volatile mining component, improved relative to the historical lows recorded in December (31.4%, 50 = neutral), it remained at a still weak 39.8% in February (52.0% registered one year earlier). Hence, considering heightened domestic uncertainty is set to persist, an investment rebound is not expected.

While the economy is rebounding from the October shock well above expectations, the outlook remains challenging. The better-than-expected activity carry-over at the close of 2019, along with the upside surprise in January and the positive effect of the fiscal stimulus package, would have placed a significant upside bias to our 1.2% growth call for this year (1.2% in 2019). However, the developments to the global economy (related to the spread of the coronavirus) would be felt domestically (from weakened China demand in particular), all but wiping out our bias. Given the increased probability that central banks across the globe ease monetary policy in response to the expected activity slowdown, our call of 50bps of further easing in Chile is becoming more likely. ** Full story here.

ICARE’s business confidence index for February continued to fall over 12 months, but left record lows behind. The 10.3pp drop to 43.9 (54.2 one year before, 40.7 in January) was led by construction falling 22.2pp to 25.7 (20.18 in January). Three out of four sub-indices remained in pessimistic territory, with only mining in optimistic ground (61.6, flat from January; 63.4 one year before). Retail confidence declined 16.1pp to 42.0 (58.1 in February 2019), while the industrial gauge deteriorated 4.7pp from 50.0 one year ago. 


The trade balance in February was positive by $3.1 billion, beating our forecast ($1.2 billion surplus) and market estimates ($1.5 billion surplus). Higher-than-expected exports in the last week of the month were behind the surprise vs. our call.  The balance resulted from $16.4 billion exports and $13.3 billion imports and is slightly weaker than the $3.3 billion surplus posted one year earlier. The annualized seasonally adjusted quarterly moving average trade surplus receded to $36.9 billion from $40.7 billion. In the coming years, we forecast narrower trade surpluses than those recently observed ($40 billion in 2020 vs. $43.1 billion in the 12 months through February and $46.7 billion in 2019). Exports are expected to remain stable, but we cannot rule out a scenario in which they recede due to the global slowdown caused by the coronavirus epidemic. Imports, in turn, are expected to rise amid some recovery in domestic demand throughout the year. **Full story here.

According to Fenabrave, vehicle sales reached 201k in February, increasing 18.6% mom/sa according to our seasonal adjustment. In yoy terms, sales advanced 1.2%. The strong print comes after vehicles sales dropped 2.3% mom/sa in December 2019 and 6.9% in January 2020. The breakdown shows a 19.3% mom/sa increase in “passenger cars + light vehicles”, and a 4.8% mom/sa grow in “trucks + buses”.

Day Ahead: Local news indicate that the Senate may vote the PLP 19/2019, which sets fixed mandates for the central bank’s directors and governor.


CPI posted a 0.14% increase in February, broadly in line with market expectations of 0.15%. The monthly figure was pressured mainly by an upward adjustment in the excise tax to cigarettes and a seasonal increase in agro prices, while a fall in electricity tariffs exerted a downward pressure. We expect inflation at 2.0% by the end of 2020. The widening of the output gap keeps inflation subdued, supporting – along with rising risks for global economic activity - the BCRP delivering additional rate cuts **Full story here.


Day Ahead: The central bank will release its monthly expectations survey. In the previous survey, analysts ticked their inflation forecast for 2020 down to 41.7% from 42.3%. However, pundits raised their forecasts for 2021 to 31.3% (from 30.1%). Other variables surveyed are activity, interest rate (Badlar), exchange rate and primary fiscal balance.

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