UPDATE 1-Chile Q3 growth data signals crisis recovery-cbank

(Updates with central bank report quotes)

SANTIAGO, Nov 11 (Reuters) - Chile's central bank said on Wednesday the economy likely expanded 5.3 percent in the third quarter compared with the second quarter, signaling the start of economic recovery from global crisis.

In a report prepared by the bank's research department and given to the monetary policy board to evaluate, the central bank also said the economy likely contracted 1.3 percent in the third quarter compared with the same quarter last year due to lower industrial activity.

"Unlike in past quarters, the level of activity likely grew 5.3 percent (in the third quarter)... compared to the immediately prior quarter, marking the start of a scenario of economic recovery," the report said.

"Several sources of information signal that in coming months various investment projects will be resumed. However, it is possible that annual activity readings remain negative for several months," it added.

Chile's economic activity index, the IMACEC, fell by a steeper-than-expected 1.1 percent in September from the same month a year ago, hit by a drop in industrial output which cast a cloud over economic recovery hopes.

The Chilean economy is expected to contract 1.5 percent to 2 percent this year, according to the central bank. Growth for 2010 is forecast at between 4.5 percent and 5.5 percent.

The central bank report also said consumer prices would likely fall in November, and with them annual inflation.

Chile's consumer price index was flat in October, in line with market expectations, as lower transport and gas costs offset a rise in fruit and vegetable prices, government data showed last week.

Chile's central bank has forecast a 0.8 percent decline in prices for 2009 and inflation of 2.8 percent for 2010 as economic growth returns after the ravages of global financial crisis. (Reporting by Rodrigo Martinez and Simon Gardner; Editing by Diane Craft)