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Chile Economy Grows for Second Month as Recovery Gains Steam

(Bloomberg) -- Chile’s economic activity rose for the second straight month on increases across multiple sectors, bolstering government claims that the recovery is gradually gaining strength.

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The Imacec index, a proxy for gross domestic product, increased 0.8% in February compared to January, less than the 1% median estimate in a Bloomberg survey. Still, January’s month-on-month rise was revised higher, to 2%, the central bank reported on Monday.

The index also gained 4.5% from the year prior, marking the biggest annual jump since May 2022.

Chile’s economy is gaining traction after political tensions, weak demand and high inflation weighed on activity in 2023. The central bank is expected to extend its cycle of rate cuts on Tuesday, and sectors including manufacturing and retail are improving. The government is sticking with 2.5% growth forecast for this year, which would be above the Latin American average.

Read more: Chile Central Bank Chief Plans to Unwind Tight Monetary Policy

What Bloomberg Economics Says

“Monthly data signal the economy is growing faster than analysts and policymakers anticipated. The outsize results highlight fewer downside risks to growth and inflation, and should moderate market expectations for the central bank easing cycle.”

— Felipe Hernandez, Latin America economist

— Click here for full report

Mining activity increased 2.5% on the month in February, according to the central bank. Industry jumped 2.1% during the period, while services rose 0.5% and commerce ticked up 0.4%.

Policymakers are expected to lower borrowing costs by 75 basis points to 6.5% tomorrow according to analysts in a Bloomberg survey, down from 11.25% at the start of the easing cycle in July. Central bankers have signaled plans to bring rates to a neutral level near 4% in the second half of the year.

Separate data published Thursday showed retail sales, manufacturing and industrial production posting faster year-on-year growth in February than economists had expected. Unemployment ticked up to 8.5% during the month.

The recovery in Chile’s growth will help improve the business environment as the government lures investments in sectors such as lithium, Economy Minister Nicolas Grau said in a March interview.

--With assistance from Giovanna Serafim.

(Updates with details from the activity report in the third paragraph, economist quote in fifth paragraph)

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