* Manufacturing output falls 2.7 pct in June on year
* Copper output up 6.5 pct to 482,252 tonnes
* Retail sales grow 7.7 pct, slowing vs prior months
By Antonio De la Jara and Felipe Iturrieta
SANTIAGO, July 30 Chilean manufacturing extended
its sharp decline in June and retail demand growth slowed,
stirring some analysts' expectations that the central bank is
close to cutting its benchmark interest rate for the first time
since January 2012.
Manufacturing output fell 2.7 percent in June
compared with a year earlier as plant closures, restructuring
and strikes hit the production of metals, chemicals and wine,
Chile's national statistics agency said on Tuesday.
The fall was sharper than a Reuters poll forecast for a 0.5
percent drop.. In May, manufacturing output fell
4.2 percent from a year earlier.
On a seasonally adjusted basis, manufacturing output slumped
4.5 percent in June from May and 4.9 percent in May from April.
On Monday, Chile's budget office revised downward its
estimate of economic growth this year to 4.6 percent from 4.8
The data shed more light on the Andean nation's slowing
economy in an election year, with the presidency widely expected
to switch from the center-right incumbent party to center-left
ex-president Michelle Bachelet after November's election.
Noting cooling investment, Chile's central bank said in
minutes released Tuesday of its July 11 policy meeting that it
had considered cutting the central bank benchmark rate but in
the end opted for keeping it at 5 percent.
Regarding demand in the economy, the bank noted that the
"most evident effect was on investment, while a number of
consumption indicators were still dynamic."
Chile's bustling U.S.-style shopping malls are a reflection
of the country's buoyant consumer sector, which has dissuaded
Chile's central bank from cutting interest rates.
However, data released on Tuesday showed that consumer
demand for goods ranging from clothing and electronics to cars
was slowing from its red-hot pace.
Retail sales rose 7.7 percent in June compared with a year
earlier, which was a slowing from 13.2 percent growth in May,
according to the national statistics agency. It was the lowest
annual June growth in three years, though an extra bank holiday
compared to last year affected the overall figure.
Supermarket sales showed a similar pattern, up 5.7 percent
year-on-year in June compared to growth of 9.2 percent in May.
"For the first time in four months the retail indicator was
below double digit expansion, showing evidence of an incipient
slowing in consumption," BCP/Credicorp Capital said in a note to
It added: "The deceleration in consumption reinforces for us
the argument for a cut in the interest rate by the central
bank.(We)expect a 25 basis point cut at the next meeting."
Brokers at Nomura agreed that a 25 basis point cut was the
most likely outcome in August, saying in a note that the data
showed further weaknesses in the economy and dealt "a major blow
to the hawkish case of no urgency."
According to a central bank poll released last week, the
prevailing view of traders then was that the central bank would
keep rates on hold in August but cut by a quarter-percentage
point within three months and another 25 basis points within six
Signs of slowing growth in China are a major concern for the
bank. The Asian country is a key buyer of Chile's copper, which
makes up more than half of Chile's exports.
The production of copper rose 6.5 percent to 482,252 tonnes
compared with a year ago, the statistics agency said on Tuesday.
The price of copper has struggled recently against
signs of weakening demand from China, losing 8 percent in June.