Itaú BBA - CHILE – Manufacturing activity recovered in November

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CHILE – Manufacturing activity recovered in November

Dezembro 31, 2019

We now expect a 3% contraction for the monthly GDP proxy in November.

In November, industrial production was dragged down by mining, while a robust manufacturing recovery following protest-affected October lifted activity. The 7.1% YoY contraction in mining production (mainly explained by poor metallic mining amid a high base of comparison and problems in some key operations in the month) explained -3.3pp of the industrial production annual 1.8% contraction, while manufacturing contributed with 1.4pp as it expanded 3.2% YoY (above our expectation of a 0.6% contraction). Once corrected for calendar effects, manufacturing production grew a milder 1.8% YoY, after posting a strong 5.9% MoM in November, following the 4% contraction in October when protest activity peaked. The stronger-than-expected data made us revise our forecast for the November monthly GDP proxy (IMACEC) to -3% YoY.

In the quarter ended in November, industrial production (which aggregates manufacturing, mining and utilities) contracted 1.8% YoY (+1.5% in 3Q19). Mining led the fall, with a 3.8% YoY contraction (+1.1% in previously), while manufacturing retreated 0.1% YoY after expanding 2.5% in 3Q19. Meanwhile, utilities posted a mild expansion of 0.1% YoY, following a 0.6% contraction in 3Q19.

Sequentially, weak mining led the sharpest industrial activity contraction since April 2017. Mining fell 10.3% qoq/saar in the quarter ended in November (0% in 3Q19), manufacturing shrunk 7.1% qoq/saar (-1.9% previously), while utilities improved to 1.6% qoq/saar from -1.1%. Overall, the industrial production index recorded a 10% qoq/saar contraction after expanding 1.6% in 3Q19.

While somewhat better activity in November is a positive development, weak momentum at the end of the year means growth will likely remain low in 2020. As we expect growth of 1.2% next year, after GDP expands just 1% in 2019, the option of lowering rates will remain on the table in coming months.
 

Miguel Ricaurte
Vittorio Peretti



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