(Corrects paragraph 10 to say interest rate was cut in October
and November, not September and October)
SANTIAGO Dec 5 Chile's economic activity grew
at its slowest pace in nearly 2-1/2 years in October, weighed
down by a drop in manufacturing output and the weak performance
of the wholesale commerce, corporate service and transport
sectors, the central bank said on Thursday.
Economic activity, as measured by the IMACEC index
, rose 2.8 percent in October from the same month in
2012, the weakest growth in a month since July 2011.
That is well short of market expectations for a 4.0 percent
The monthly IMACEC index encompasses about 90 percent of the
economy tallied in gross domestic product figures, released
In comparison with September, economic activity decreased a
seasonally adjusted 0.1 pct in October.
"The Chilean economy decelerated mainly due to less dynamism
in investment," Finance Minister Felipe Larrain said on Twitter.
Chile's relatively small, open economy has been gradually
slowing as mild global growth drags on its exports and domestic
demand wanes, in particular investment.
The downbeat data highlights the challenge awaiting the
country's next president, likely center-left Michelle Bachelet,
the front runner in the Dec. 15 runoff vote. She will have to
juggle pledges for increased fiscal spending on education and
healthcare with a slowing economy.
The central bank cut its estimates for 2014 economic growth
on Tuesday, pointing to slowing consumption and lower global
commodities prices, but said it does not forecast significant
changes in the benchmark interest rate.
Following two consecutive 25-basis-point cuts to the key
interest rate in October and November, it now stands at 4.5
percent. The bank's governing board members will hold their next
monetary policy meeting on Dec. 12.
The bank has said it doesn't anticipate "significant changes
to the key interest rate will be necessary" but has underscored
that were they to become necessary, monetary policy has room and
is available to make further adjustments.
"We forecast the central bank will pause its process of
cutting interest rates as it waits for more information
regarding how fast domestic demand and investment are
decelerating," said Matias Madrid, chief economist at Banco
Penta in Santiago.
After growing 5.6 percent last year, the world's top copper
producer is seen wrapping up 2013 with 4.2 percent growth and
then expanding between 3.75 percent and 4.75 percent next year.
(Reporting by Santiago bureau; Writing by Anthony Esposito;
Editing by Theodore d'Afflisio)