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UPDATE 2-Chile March economic activity growth slowest in 20 months
May 6, 2013 / 1:05 PM / 5 years ago

UPDATE 2-Chile March economic activity growth slowest in 20 months

* Fall in industry, fewer working days weigh on indicator
    * Mining, retail sectors expand
    * Chile central bank expected to hold rates at 5 pct this

    SANTIAGO, May 6 (Reuters) - Chile's economic activity growth
in March was the slowest since July 2011, as expansions in the
mining and retail sectors were partly offset by declining
industrial activity and two fewer working days, the central bank
said on Monday.
    The IMACEC economic activity index grew 3.1
percent versus a year earlier, coming in below forecasts for a
4.3 percent expansion. 
    During the first quarter, economic activity grew 4.4 percent
compared with the same period a year ago. In seasonally adjusted
terms, March posted no variation versus February.     
    An extended port strike also hit March's growth, Finance
Minister Felipe Larrain said later on Monday, adding the
stoppage would weigh on April's data too.       
    Firm domestic demand, a tight labor market and solid levels
of investment have so far helped the world No.1 copper producer
avoid a sharp slowdown on the back of global economic woes. 
   But analysts warn Chile's open, export-dependent economy is
vulnerable to global economic turbulence.
    "Domestic activity's recent trend lowers pressure on the
central bank for it to restrict monetary policy," Banchile
Inversiones said in a note to clients. 
    Concern over ebullient local consumption had led the market
to forecast a rate hike in the mid-term. 
    But the central bank's traders poll last month showed the
bank is now expected to hold rates through a two-year time
horizon, as the global economic outlook sours and Chile's
economy appears to ease its surging growth. 
    "The necessary conditions are present for the central bank
to hold its key rate at 5 percent at its May 16 meeting and
reiterate its neutral bias, which will presage a rate hold
during the rest of the year," Banchile added. The bank has held
the rate at 5 percent since a surprise 25 basis point cut in
January 2012. 


     The central bank forecasts Chile's economy will expand by
4.5 percent to 5.5 percent this year, easing from 5.6 percent
growth in 2012.
    Economic growth in Latin America and the Caribbean is seen
speeding up in 2013 from last year, though at a slower pace than
initially forecast, the United Nations economic body for Latin
America said in April. 
    Mexico's economy slowed markedly in the first quarter of
this year, hit by a slowdown in the United States, the country's
finance ministry said late last month. 
    The economy of regional giant Brazil is expected to grow 3.0
percent this year, according to the median forecast of
economists in a weekly central bank poll. While that rate would
be three times faster than last year's meager 0.9 percent growth
rate, it would be far from the eye-popping expansion rates that
lured in foreign investors last decade.

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