WRAPUP 2-Chile economy booms: factory output up, jobless at 6-yr low
* Jobs in farming, hotels, restaurants increase * Factory data beats expectations, boosted by food industry * Copper output up on ore grades, productive capacity * World No. 1 copper producer withstands global headwinds By Anthony Esposito and Antonio De la Jara SANTIAGO, Feb 28 (Reuters) - Chile exhibited strong growth in the new year as manufacturing activity outpaced expectations in January, unemployment hit a six-year low and production of top export copper rose, government data showed on Thursday. With Chile's economy running near full-employment, domestic demand booming and firm investments fueling economic growth, in stark contrast to looming global economic risks, the central bank has kept its key interest rate on hold since a surprise cut in January 2012. The South American nation has mostly fared better than expected despite slowing commodities demand from top trade partner China and fallout from the euro zone crisis. Manufacturing output in the small, export-dependent economy grew 4.3 percent in January from a year ago, boosted by the food industry, beating a Reuters forecast for a 3.4 percent increase. "This expansion is chiefly due to strong dynamism of the food industry, especially the dairy industry, which has increased its productive capacity," the government's INE statistics agency said in a report. "Additionally, though to a lesser extent, an increase in medicine production ... and more output of metal products mostly destined to the mining sector (affected the indicator)." According to the INE, retail sales surged 9.5 percent on the year in January, while supermarket sales increased 3.8 percent. However, sizzling local demand, a tight labor market and fast-paced growth could harbor future inflationary pressures and prove a double-edged sword, analysts warned. And despite Chile's surprisingly low jobless rate, economists say underemployment and low wages remain significant issues for many Chileans. "Those sectors most closely linked to domestic spending continued to grow, with the retail sector posting the highest growth rates ... due to positive consumer confidence, favorable credit conditions, salary growth and the drop in unemployment," Sebastian Senzacqua, economist at BICE Inversiones in Santiago, said in a note to clients. BICE sees economic growth potentially speeding up "way above" Chile's potential in coming months, which it said "could rouse up talk of overheating and its consequences on inflation's trajectory." Inflation in the 12 months to January was 1.6 percent, remaining well below the central bank's target range of 2 to 4 percent. The jobless rate for November to January inched down to 6.0 percent, falling to its lowest since October-December 2006, due to increased employment in farming, hotels and restaurants during the southern hemisphere summer. The median response of 11 analysts and economists polled by Reuters forecast the jobless rate to have remained at 6.1 percent. In November 2011 to January 2012, the rate was 6.6 percent. In December, manufacturing output had unexpectedly slipped 2.5 percent in annual and monthly terms, led lower by fewer working days, a fall in wine production and less output of chemicals and certain metals. It was the second time in 2012 the index fell versus the prior year. The index, which is broadly comparable to the prior industrial output index, grew 3.7 percent in January 2012. Chile produced 474,496 tonnes of copper in January 2013, an 8.6 percent expansion from a year earlier, on higher ore grades and improved productive capacity at some deposits, the INE also reported on Thursday. But compared with December, output slipped 7.6 percent. The INE statistics agency did not give an explanation for the drop, though the country's copper output is usually lower in January. Chile, the world's No. 1 copper miner, is seeking to increase production in many of its ageing mines, although analysts warn that accidents, extreme weather and energy woes threaten increases in output. The Sonami mining association sees Chile attracting $100 billion in mining investment in the next 10 to 12 years, a slightly longer time frame than previously forecast, as regulatory uncertainty and energy woes loom as key risks. The Andean country's output of the red metal jumped by 3 percent to 5.455 million tonnes during all of 2012, boosted by better grades, new mines and a low base of comparison. Chile's molybdenum output grew 7.1 percent year-on-year to 2,447 tonnes in January, the INE added.
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