SANTIAGO, March 5 Chile's monthly economic
activity rose at its weakest pace in nearly four years in
January, undershooting market estimates and adding to evidence
that an ongoing slowdown in the top copper exporter could be
more severe than expected.
The IMACEC economic activity index,
encompassing about 90 percent of the economy tallied in gross
domestic product figures, rose 1.4 percent in January from the
same month a year ago, the central bank said on Wednesday.
That came in below a Reuters poll forecast for a 1.9 percent
rise and is the lowest figure since March 2010, when the country
was still reeling from a devastating earthquake.
It is also the lowest January reading since the 2009
The weaker-than-expected data follows news last week of
anemic manufacturing output, less frenetic retail sales growth
and disappointing jobless figures.
It puts pressure on the incoming government of Michelle
Bachelet, who will be inaugurated on March 11 and who has
promised an increase in tax-and-spend policies.
Bachelet's chosen finance minister, Alberto Arenas,
criticized the policies of the current conservative government
for exacerbating the situation by reducing public investment.
"The new government is receiving an inheritance from the
current administration of a decelerating economy, a low growth
inheritance," he said on Wednesday.
He stuck to previous pledges of a blitz of 50 reforms in 100
days, but gave no detailed guidance on the timetable.
Outgoing finance minister Felipe Larrain warned on Tuesday
that the new government's planned tax reforms should be watered
down in the context of the economic slowdown.
EXPECTING A RATE CUT
The downbeat data will also increase expectations that the
central bank will continue its easing cycle when it meets to
decide the benchmark interest rate next week.
The market is already predicting a cut to 4.0 percent from
4.25 percent, after the bank maintained a negative bias when it
reduced rates from 4.5 percent last month.
"We estimate that these levels of activity continue to make
the argument for cuts to the interest rate soon, very probably
in the first quarter," said economists at BCI.
In the minutes of the February decision published on
Wednesday the bank said that all board members "stressed that
recent data pointed to a deeper than expected slowdown."
It said the "surprise" was that output and consumption
continued to grow in line with expectations.
Although the rate of growth is slowing, retail sales have
remained robust, propping up the economy in recent months. Late
Tuesday, Chilean retail giant Falabella reported profit
up 15 percent in the fourth quarter.
In comparison with December, January's IMACEC decreased a
seasonally adjusted 0.6 pct. The December 2013 IMACEC reading
was 2.6 percent growth, the lowest of the year.