Chile: Economic activity remains stunted in Q2
August 19, 2019
The economy grew 1.9% year-on-year in the second quarter, slightly above the previous quarter’s 1.6% outturn, which had marked the slowest expansion since Q2 2017. A marginal recovery in mining activity led the improvement in economic activity, which had been largely anticipated by analysts.
Domestic activity lost stride in the second quarter. Notably, private consumption moderated (Q2: +2.3% year-on-year; Q1: +3.2% yoy) due to a fall in durable goods purchases, particularly of automobiles. Government consumption also slowed in Q2, increasing 2.2% following the revised 2.6% expansion recorded a quarter prior (previously reported: +1.7% yoy). On a brighter note, fixed investment gathered momentum (Q2: +4.8% yoy; Q1: +3.2% yoy, previously reported: +2.9% yoy), on the back of upbeat construction activity.
On the external front, exports contracted for a second consecutive quarter and at a shaper pace than in Q1 (Q2: -3.2% yoy; Q1: -2.0% yoy, previously reported: -1.8% yoy), weighed by downbeat shipments of copper. On the other hand, imports fell for the first time in three-and-a-half years (Q2: -3.5% yoy; Q1: +1.4% yoy, previously reported: +2.3% yoy), thus somewhat cushioning the slump in exports.
Looking at the industry-level performance, a marginal recovery in the mining economy drove Q2’s uptick in overall growth. Mining GDP rebounded 0.2% annually in Q2, after contracting 4.2% in the previous quarter. That said, non-mining GDP growth edged down to 2.1%, from 2.2% in Q1.
On a quarter-on-quarter basis, GDP rose 0.8% in Q2, after recording null growth in the first quarter.
Growth prospects for the Chilean economy have steadily fallen since the year’s outset, as heightened trade tensions and slower growth in China weighed on demand for copper. Going into the second half of the year, cheaper financing conditions, increased fiscal spending and a revamped tax regime should boost economic activity.
Author: Nicolás J. Aguilar, Economist