Itaú BBA - CHILE – Large trade surplus in May

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CHILE – Large trade surplus in May

Junho 8, 2020

As job losses rapidly rise, import dynamics are set to remain weak ahead

A USD 1.4 billion trade surplus was registered in May, USD 0.2 billion above our call, and far wider than the USD 0.2 billion registered last year as weak domestic demand and low global oil prices aid a swift correction of external imbalances. Exports deteriorated on a widespread scale as global demand softens, but the import slump was more striking. As a result, the rolling 12-month trade surplus increased to USD 7.2 billion, from USD 5.1 billion as of March and USD 4.2 billion last year. At the margin, the trade surplus in the quarter is at an even wider USD 12.9 billion (annualized and according to our SA adjustment; USD 8.4 billion in 1Q20 and USD 5.6 billion in 4Q19). With coronavirus lockdown measures persisting, domestic demand is faltering as job losses rapidly rise. Hence, import dynamics are set to remain weak ahead, only partly countered by the oil price recovery.

Exports declined at the sharpest pace since October last year, the height of social unrest that hampered transport and shipping operations. The 15.2% yoy fall (6.3% down in April) came amid double-digit drops in all three categories (mining: 11.0%, manufacturing: 17.2%, and agriculture: 29.0%). As a result, exports fell 10.3% in the quarter ending in May (7.5% fall in 1Q20 and 9.4% drop in 4Q19). At the margin, exports fell 27.8% QoQ/SAAR, following the 5.7% drop in 1Q20 (12.3% drop in 4Q19).

Imports declined further in May, shrinking 36.4% yoy (22.7% drop in April), in line with the expectation of domestic demand being hard-hit during the current crisis. Consumer goods imports in the month nearly halved from last year (down 43.8% yoy; 32.6% fall previously), dragged by the durable goods component. Capital goods imports fell 22.0% (16.9% down in April), pulled by freight equipment, while mining and construction machinery dropped 55.7% (the eighth consecutive month of declines). As oil prices plummeted and mobility restrictions are in place, energy imports shrunk 72.7% yoy (53.8% drop previously). With oil prices posting some recovery recently, the energy import drag is likely to moderate somewhat ahead. In the quarter ending in May, imports shrunk 26.7% yoy, beyond the 14.1% fall registered in 1Q20 (13.9% down in 4Q19). At the margin, the import deterioration intensified to -50.5% QoQ/SAAR, a pace only surpassed during the peak of the global financial crisis (-75% QoQ/SaaR). While a significant explainer of the softened import demand comes from the energy component, consumer goods are declining swiftly (-61.8% QoQ/SaaR).

The domestic demand implosion and weakened currency are causing a sharp decline in import demand, assisting a swift correction of external imbalances. We see the current account balanced this year, from a 3.9% deficit in 2019.

Miguel Ricaurte
Vittorio Peretti

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