Central bank report
Chile’s economy bucks global concerns and surges ahead in 2012
Chilean gross domestic product is up 6.2 percent this June compared to last year, led by retail, electricity generation, and internal demand.
Friday, August 10, 2012
Manufacturing and local demand fuel a booming Chilean economy. Photo: Leandro Alvarez Vargas / Flickr
The European economy may be giving financial analysts nightmares and the Chinese facing a significant deceleration, but you wouldn’t know it looking at the situation in faraway Chile.
Chile’s economy grew at its fastest clip in four months this June, with local consumption showing few signs of concern about external conditions.
The Chilean central bank’s economic activity indicator, IMACEC, is up 6.2 percent this June as compared to a year earlier, increasing the 5.3 percent expansion this May from that of last year. A monthly indicator of economic activity, the IMACEC measures more than 90 percent of Chile's gross domestic product, which is published quarterly. Essentially, it is a gauge of raw economic growth.
Bloomberg reported that the June IMACEC figure exceeded by half a percentage point the highest estimates made by 14 analysts polled by that business news organization earlier in the year.
"It seems the external crisis is only affecting the export sector fairly lightly," Sergio Tricio, head of research at the Forex Chile brokerage in Santiago, told Reuters. "You can see that retail and electricity generation, which correspond to domestic demand, are mitigating external effects."
Retail and manufacturing lead surge
The central bank identified the retail and manufacturing sectors as the primary instigators of June’s bumper growth period. Industrial output in Chile grew 2.9 percent this June as opposed to last, mainly because of increased mining production, as well as a surge in manufactured goods output and the utilities sector.
While the bank indicated a slower acceleration of industrial production, many companies are expected to increase output as internal demand continues to remain strong, economist Felipe Alarcón told Bloomberg.
“This cycle of consumption and retail still is sustainable so long as it doesn’t generate strong inflationary pressures,” said Alarcón, deputy director of research at Banco de Credito e Inversiones, or BCI. “This for now drives away any fear of contagion and also makes it less likely the central bank will try to reduce rates in at least its next meeting,” Alarcón said.