Chile: Growth slows to near two-year low in Q1
Growth decelerated to 1.6% year-on-year in the first quarter, more than half Q4 2018’s 3.6% and marking the slowest acceleration since Q2 2017. A sharp drop in mining activity led the weaker first quarter performance, which had been largely anticipated by analysts.
Domestic activity lost stride in the first quarter. Notably, despite upbeat business confidence, fixed investment growth nearly halved amid slower expenditure in machinery and equipment (Q1: +2.9% year-on-year; Q4 2018: +5.6% yoy), surprising analysts who had expected it to underpin the quarterly expansion. In addition, household spending moderated amid slow gains in employment and lower consumer sentiment (Q1: +3.2% yoy; Q4 2018: +3.6% yoy). Meanwhile, government spending rose 1.7% in Q1, accelerating from Q4’s 1.3% expansion.
On the external front, exports contracted in Q1 on falling copper shipments and logged the weakest print in seven quarters (Q1: -1.8% yoy; Q4 2018: +3.3% yoy). On the other hand, import growth decelerated from 6.6% in Q4 to 2.3% in Q1, cushioning the external sector’s downturn somewhat.
Looking at the industry-level performance, the first-quarter slowdown was driven by slump in the mining economy. Mining GDP contracted 3.6% annually in Q1, following a 1.3% expansion in the previous quarter, amid adverse weather conditions in February. In addition, non-mining GDP growth slowed to 2.2%, from 3.7% in Q4 2018.
On a quarter-on-quarter basis, GDP recorded null growth in the first quarter, down from Q4’s 1.3% upturn.