WRAPUP 2-Chile economy booms: factory output up, jobless at 6-yr low

Thu Feb 28, 2013 11:40am EST

Related Topics

* 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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