UPDATE 1-Chile jobless rate at 1-1/2 year high, economy still weak

Wed Apr 30, 2014 10:36am EDT

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SANTIAGO, April 30 (Reuters) - Chile's jobless rate in the first quarter rose to 6.5 percent, its highest in 1-1/2 years, while manufacturing output in March fell shy of expectations, underscoring continued weakness in the economy of the top copper exporter.

The unemployment rate was above market expectations for a rise to 6.3 percent.

Chile's open economy has been slowing in recent quarters on cooling domestic demand, especially investment, prompting the central bank to cut its benchmark interest rate by 100 basis points since October in a bid to spur stronger growth.

Unemployment increased from 6.1 percent in the December to February period as jobs in the manufacturing and agricultural sectors decreased, the government's INE statistics agency said on Wednesday.

"The uptick in the March unemployment rate and the significant contraction in imports, particularly of capital goods, witnessed so far in April suggest the economy remains in a soft patch," said Tiago Severo at Goldman Sachs.

"Against this backdrop, we reiterate our projection that the central bank will likely ease the policy rate by at least another 25 basis points over the coming months," Severo added.

The relatively poor economic performance is piling pressure on the government of newly-elected President Michelle Bachelet. It wants to raise taxes and spending, but opposition politicians and business leaders say that is risky when the economy is hurting.

Manufacturing production rose 0.8 percent in March from a year earlier, fueled by the foods sector and one extra business day, the INE said.

That was slightly lower than a Reuters poll forecast for a 1.0 percent rise.

On a seasonally-adjusted basis, manufacturing production jumped 12.9 percent in March from February.

Retail sales, an indicator of consumer appetite, increased 5.2 percent in March, but was still the lowest since at least January 2013. (Reporting by Santiago bureau; Writing by Anthony Esposito; Editing by James Dalgleish and Bernadette Baum)

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