Itaú BBA - CHILE – Upbeat activity in February

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CHILE – Upbeat activity in February

Abril 1, 2020

Despite the activity improvement at the beginning of 2019, we expect a 1.6% contraction this year.

Prior to the coronavirus pandemic outbreak, activity remained upbeat, led by mining. The monthly GDP proxy expanded 2.7% YoY, below our 3.3% call and close to the Bloomberg market consensus. Mining posted the strongest growth since early 2018, expanding 10.4% YoY (+1.9% previously) given a low base of comparison last year. Meanwhile, non-mining activity (led by manufacturing and construction) also improved to post the highest growth rate since before the protest action in October 2019, with a 2% YoY expansion. The seasonally and calendar adjusted series expanded 0.6% MoM from January, leading to a 2.5% YoY growth, as February 2020 was a leap month. Overall, the upbeat data print will not continue past March, as the direct impact of the coronavirus advancement and the social distancing measures adopted sharply depress activity.

In the quarter ended in February, growth was the highest since 3Q19. The GDP proxy posted a 1.5% YoY expansion, recovering from the 2.1% drop in 4Q19 (3.4% in 3Q19), with the mining improvement to 3.7% YoY (-2% in the last quarter of 2019) leading the way. Non-mining activity also recovered from the protest-stricken 4Q19, expanding 1.3% in the quarter ended in February (-2.2% previously).

Sequentially, activity improved sharply from the end of last year. Activity posted a 14.8% qoq/saar gain in the quarter ended in February, partially countering the 15.6% fall in 4Q19. Non-mining sectors led the recovery at the margin, as they expanded 15.5% qoq/saar (-15.5% in 4Q19), while mining activity also improved (to 8.2% from -16.8% previously).

We expect a 1.6% contraction for GDP this year. Our base-case scenario is for a sharp drop in growth in 2Q20, followed by a robust recovery thereafter, aided by the significant fiscal and monetary stimulus put forward at a global level. Yet, risks are tilted to the downside in activity, justifying rates a “technical minimum” for a prolonged period of time.


Miguel Ricaurte
Vittorio Peretti

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