_Economy and Finance

Chile: Two Activity Roads Diverged More Nader Nazmi, Oscar Munoz - Market Economics Latam Macro Snapshot | 28 Jun 2013 18:26 | 242 Kb Supply and demand data diverged further in May. Retail sales data showed continued strong consumer demand while manufacturing and IP data reflected slowing production. Manufacturing production declined 4.2% y/y in May, surprising our and market expectations projecting expansions of 1.3% and 1.7% y/y, respectively. The setback in manufacturing production was broad-based with eight of its thirteen divisions retreating in the month. Apart from being impacted by a high comparison base, the main contribution to the annual contraction came from lower production of chemicals (-12.6% y/y).

Chile: Manufacturing is weakening, despite April bounce Nader Nazmi - Market Economics Latam Macro Snapshot | 30 May 2013 18:07 | 327 Kb Manufacturing production expanded 3.4% y/y in April, in line with our 3.6% y/y call, and better than the consensus projection of 2.9% y/y. The main contribution to the annual gain came from increased production of processed food (+13.7% y/y). Despite the rebound, manufacturing growth in April is disappointing, especially given that this April had two more working days than April 2012.

Chile: Q1 Growth Disappoints Nader Nazmi - Market Economics Latam Macro Snapshot | 20 May 2013 16:29 | GDP growth came in 4.1% y/y in Q1 , weaker than the consensus estimate of 4.5% and our own projection of 4.4%. On a quarterly basis, growth posted 0.50% q/q (sa) higher in Q1, in line with our 0.45 q/q call but weaker than 1.0% q/q consensus projection (Chart 1).

Chile: Deeper Deflation than Expected Nader Nazmi - Market Economics Latam Macro Snapshot | 08 May 2013 14:04 | Consumer prices declined 0.5% m/m in April. The monthly decline exceeded the 0.1% m/m drop that the consensus and we had anticipated. The main difference was a 2.0% m/m decline in transportation prices, which subtracted 0.4pp from headline inflation. The decline in transportation prices was driven by a 13.2% m/m drop in bus fares due to holiday-related factors.

Chile: Growth Disappoints in March and in Q1 Nader Nazmi - Market Economics Latam Macro Snapshot | 06 May 2013 14:50 | Chile’s monthly GDP (Imacec) fell well short of expectations with growth slowing to a 20-month low in March. Real GDP growth decelerated from 3.8% y/y in February to 3.1% y/y in March compared to the consensus and our projections of 4.7% y/y and 5.1% y/y, respectively. A 3.0% y/y contraction in manufacturing output was the main drag on growth, as expected. Growth in the service sector (+4.1% y/y), however, also disappointed. Mining output increased 6.9% y/y.

Chile – Consumer confidence retreats in March. March consumer confidence fell to 56.8 from 58.1 in February. This was the lowest confidence level since a 53.4 print reached in November. However, compared with last March, consumer confidence improved 22.9%. We continue to expect a gradual moderation in domestic demand during the year, helping to keep inflation in check and the policy rate steady.

Chile In a broadly neutral statement – and as expected – the Central Bank of Chile (BCCh) kept its policy rate unchanged at 5.0%. The board maintained its data-dependent stance and further reinforced our call for the bank to remain on hold for the foreseeable future.

Chile: Feeble February Growth Nader Nazmi - Market Economics Latam Macro Snapshot | 05 Apr 2013 | Growth of real GDP, as measured by its monthly proxy Imacec, decelerated from 6.5% y/y in January to 3.8% y/y in February. This is in line with our 3.9% y/y forecasts but falls well short of the 4.8% y/y median estimate from the Bloomberg survey.

Chile: IPoM – Life is Good, Why Change? Nader Nazmi - Market Economics Latam Macro Snapshot | 02 Apr 2013 17:11 | The Monetary Policy Report (IPoM) released today makes it clear that the central bank (BCCh) will remain on hold for the foreseeable future as it expects trend growth and on-target inflation. The base scenario is as good as it gets but the BCCh remains mindful of risks. Nothing lasts forever. The IPoM’s key conclusions are supportive of our view that BCCh will remain on hold this year.

Chile: All Reasons Lead to a Longer Pause Nader Nazmi - Market Economics Latam Macro Snapshot | 01 Apr 2013 21:13 | According to the minutes of the 14 March monetary policy meeting, there are good reasons to cut and there are good reasons to hike. But, on balance, all reasons lead to a longer pause.

Chile – This week’s data would reflect soft activity in February. Focus will be on BCCh publications. CHILE Manufacturing output and retail sales growth decelerated in February, and the unemployment rate edged up two ticks to 6.2%. February data are providing partial evidence that the slowdown in activity from unsustainable levels that the central bank has been anticipating (and hoping for) may finally be happening. As such, they reduce the likelihood that monetary tightening will be required in the months ahead to cool the economy.

Chile: Signs of Growth Slowdown Nader Nazmi - Market Economics Latam Macro Snapshot | 28 Mar 2013 13:33 | Manufacturing output and retail sales growth decelerated in February and the unemployment rate edged up two ticks to 6.2%. February data are providing partial evidence that the slowdown in activity from unsustainable levels that the central bank has been anticipating (and hoping for) may be finally happening. As such, they reduce the likelihood that monetary tightening will be required in the months ahead to cool the economy.

Chile – FinMin Larrain proposes new cut on stamp duty. Finance Minister Felipe Larrain announced yesterday that the government is currently weighting a new cut on the stamp duty (tax on loans). The FinMin said that the plan looks to cut the rate to 0.2% from 0.4%, the third reduction during Pinera’s administration (it was 1.2% when he entered office). This is done in an effort to reduce tax evasion. He expects the tax proposal to be approved in the next couple of months. Separately, Larrain mentioned that the government is always concerned about the appreciation of the peso, and it is responding to the currency’s strength the best it can.

Chile: All Signs Point to Buoyant Domestic Demand Nader Nazmi - Market Economics Latam Macro Snapshot | 18 Mar 2013 17:17 | Data releases today confirm that domestic demand strength underpinned a rapid rise in real output and widened the current account deficit in Q4. Recent data indicate that early in Q1 domestic demand continued to grow at a pace that likely exceeded the economy’s potential, increasing the risk of overheating.

Chile: All quite on the inflation front Nader Nazmi - Market Economics Latam Macro Snapshot | 08 Mar 2013 13:37 | Consumer prices rose only 0.1% m/m in February, less than the consensus 0.3% m/m call and our own 0.2% m/m projection. Annual inflation dropped to 1.3% y/y, sinking further below the 2% floor of BCCh's target band (Chart 1).

Chile Central Bank Governor Vergara flagged increased risks, due to faster-than-expected growth. Central Bank Governor Rodrigo Vergara said that domestic demand, driven by both strong consumer spending and large investments in the mining industry, has been the driver of Chile’s rapid growth. He noted that mining investments accounted for less than 15% of total investment in 2003, and now accounts for 25% of total investments. Mining output’s share of GDP is 15%, while copper accounts for 60.0% of exports.

Daily Latam Spotlight - 6 March 2013 Chile: Growth was rapid in January The monthly proxy for real GDP, Imacec, expanded 6.7% y/y in January. This is in line with our 6.8% y/y forecast and slightly above the median estimate from the Bloomberg survey of 6.5% y/y. Growth was rapid across the board. Mining activity expanded 8.4% y/y, manufacturing advanced 4.4% y/y and services rose 6.9% y/y. The three-month moving average of GDP growth was 5.6% y/y in January, the same as in the month before. In monthly terms, real output rose 0.1% m/m in January, and was 17.0%, saar above Q4.

March 06, 2013 Chile’s Paradox of Prosperity The country’s economy is thriving, but rising expectations and gaping inequalities sap the popularity of President Sebastián Piñera’s conservative government. By Jonathan Kandell Thirty years ago, as Latin America was succumbing to the debt crisis, few nations suffered as much as Chile. The country still bore the scars of the bloody military coup that claimed the lives of former president Salvador Allende and some 3,000 supporters a decade earlier. The debt crisis hit when the economy was undergoing wrenching change from the radical free-market policies pursued by the regime of General Augusto Pinochet. The results were painful: Economic output collapsed by 14 percent in 1982, unemployment soared to more than 30 percent, nearly half the population lived below the poverty line, and the current-account deficit was running at a rate of 12 percent of GDP. http://www.institutionalinvestor.com/Article/3163684/Chiles-Paradox-of-Prosperity...

Chile: Steady Rate as the Only Option, Despite Concerns Nader Nazmi - Market Economics Latam Macro Snapshot | 01 Mar 2013 19:19 | Neutral rate and stance. We read the minutes of the 14 February monetary policy meeting as broadly neutral regarding the short-term outlook, ruling out any changes in the policy rate for now. According to the minutes, the policy rate remains within a neutral range and the decision to keep it steady at 5.0% was unanimous.

Chile: Happy 2013 Beginning for Activity Nader Nazmi - Market Economics Latam Macro Snapshot | 28 Feb 2013 15:06 | According to data releases today, the economy began the year on a strong note. In January, manufacturing output surprised to the upside, retail sales expanded rapidly and unemployment fell to a six-year low. The monthly proxy for real GDP (Imacec) due out next Tuesday is thus set to reflect rapid economic expansion in January. We project a 6.8% y/y rise in the Imacec in the first month of the year. Rapid growth supports our view that fiscal and monetary policies need to turn less accommodative to reduce the risk of overheating. Chile continues to exhibit strong growth