Consumption in Chile

Chile - Consumption

Economy performs strongly in Q2 despite fresh restrictions

GDP growth improved to 18.1% year-on-year in the second quarter, from 0.5% in the first quarter. The reading reflected in large part a favorable base effect, but was also the result of government stimulus measures, pension drawdowns, and the greater immunity of firms and households to the renewed lockdown measures that were imposed to curtail surging Covid-19 cases.

The upturn reflected a broad-based improvement in private consumption, public spending and fixed investment. Household spending increased 33.7% in the second quarter, which was above the first quarter's 5.2% expansion. Public consumption grew 20.7% (Q1: +3.3% yoy). Fixed investment growth improved to 24.8% in Q2, from the 1.1% expansion logged in the prior quarter.

Exports of goods and services contracted at a milder pace of 3.0% in Q2 (Q1: -5.4% yoy). In addition, imports of goods and services growth picked up, to 39.6% in Q2 (Q1: +17.2% yoy).

On a seasonally-adjusted quarter-on-quarter basis, economic growth slowed notably to 1.0% in Q2, compared to the previous period's 3.4% increase. Q2's reading was the worst since Q2 2020.

Turning to Q3, year-on-year growth will slow as the base effect grows less favorable, although underlying momentum will improve, spurred by the easing of restrictions since July as Covid-19 cases have plummeted.

On the reading and outlook, Alejandro Fernández Beroš, head of research at Gemines, said:

“The results of national accounts for the second quarter were a positive surprise since the estimated growth was higher than anticipated by the IMACEC and, in addition, the first quarter was revised upwards. Private consumption is largely responsible for these results. For the rest of the year we expect a very good third quarter due to the elimination of restrictions on mobility and the maintenance of income subsidies for families.”

FocusEconomics panelists see GDP growing 7.7% in 2021, which is up 0.5 percentage points from last month’s forecast. In 2022, GDP is seen expanding 3.1%.