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WRAPUP 2-Weak January jobless, factory data underline slowing Chile economy
February 28, 2014 / 1:20 PM / in 4 years

WRAPUP 2-Weak January jobless, factory data underline slowing Chile economy

(Adds copper output, month-on-month data comparisons, comment, links)

SANTIAGO, Feb 28 (Reuters) - Unemployment in Chile rose more than expected and manufacturing output slid in January, adding weight to signals that the economy of the world’s top copper exporter is entering a weaker phase.

Chile’s jobless rate for the November to January period rose to 6.1 percent, the government said on Friday, up from 5.7 percent in the fourth quarter of last year and driven principally by fewer new jobs being created in agriculture, a sector that was hit hard by a late spring frost.

Although unemployment has been hovering near multi-year lows in recent months, the rise was considerably sharper than forecast, with markets having expected the figure closer to 5.8 percent.

Meanwhile, a fall in chemicals and metals production led January factory output down 1.4 percent in the 12 months to January, and down 0.5 percent compared to December, a performance that extends an anemic trend that began in September 2013.

Chileans continued to shop, though, albeit at a less frenetic pace than in recent times. Retail sales - which have been a key driver of the economy - rose 6.8 percent compared with a year earlier, the lowest annual rise in twelve months.

The recent depreciation of the Chilean peso had in particular affected sales of imported cars, the statistics institute said. The peso has lost over 6 percent of its value compared to the U.S. dollar in the year to date.

The other key support of the Chilean economy - copper, which accounts for over half of exports - also had a relatively rough month, with production falling 3 percent from a year ago and nearly 13 percent from December.

The downbeat data increases expectations that the central bank will again cut the key benchmark interest rate at its next monetary policy meeting on March 13, having reduced the rate by 75 basis points to 4.25 percent since October.

The bank gave a negative bias alongside its decision to cut from 4.5 percent this month, and most in the market foresee a further reduction to 4.0 percent next month, likely drawing the easing cycle to an end.

“The industrial data shows that the economy’s slowdown is fully continuing. In addition, the labor market data, while not negative, indicate that it is losing dynamism,” said Matias Madrid, chief economist with Banco Penta in Santiago.

That added to the likelihood of an interest rate cut by the central bank in March, he added.

The data also highlights the economic challenges facing incoming center-left president Michelle Bachelet, who is set to take office on March 11.

For the unemployment data, see here

For the manufacturing, retail sales and copper data see here

Reporting by Alexandra Ulmer, Felipe Iturrieta and Rosalba O'Brien Editing by W Simon

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