Higher than expected growth in August.  In August, the monthly indicator for economic activity (IMACEC) increased at an annual rate of 5.9%.  While the August figure was well below the 8.1% growth rate registered in July, the market had expected growth at 5.0%.  The better than anticipated August growth data was driven mainly by a strong performance of the electricity sector, which continued to profit from a satisfactory water supply and, thus compared favourably to last year, when a protracted draught provoked large-scale power shortages.  Transport and communications also maintained the high growth rates observed throughout most of this year. 

Industrial production declines in September.  September is expected to show a further moderation in the economic growth rate, partly due to statistical effects.  According to the National Statistical Institute (INE), industrial production actually contracted 0.7% in September compared to the same month last year.  However, the Statistical Institute points out that the decline in industrial production was the result of three working days less this year than in September 1999.  If the additional working days were taken into account, the resulting 14.3% increase in working hours would have actually prompted a rise in industrial production.  Within industrial production, durable consumer goods registered the steepest contraction, with the growth rate declining from 18.8% in August to 0.9% in September.  On the positive side, capital goods production improved significantly (-0.1% compared to –10.3% in August) and when combined with strong capital goods sales data, which showed double-digit growth for the second consecutive month, indicates that the recovery in investment may finally be getting underway. 

Unemployment rises further.  In the moving quarter from July to September 2000, unemployment increased yet again to 10.7% from 10.6% the month before.  While the unemployment rate is 0.7% lower than in the same period last year, the September increase represents the seventh consecutive increase in the unemployment rate this year and continues to reflect the absence of optimism among the Chilean business community, which continues to refrain from hiring new workforce.

Inflationary expectations rise significantly.  In October, consumer prices rose by 0.60%.  While the October price increase is in line with the 0.61% rise registered in September, the figure remains well above the average monthly rate observed last year, indicating that consumer prices are maintaining their upward trend for the time being.  The annual rate increased from 4.2% in September to 4.5% in October, almost twice the historically low rate of 2.3% registered in December 1999, but still within the current 4.6% Central Bank target.  Virtually the entire consumer price spike was the result of higher prices in housing, food and transport, while other categories remained unchanged or declined.  Since vegetables, fruits and fuels prompted most of the price increase, underlying inflation (the main indicator observed by the Central Bank), which excludes these items, increased only 0.3% over last month, taking the annual rate to 3.1% from 3.0% in September.  Thus, inflation remains below the current forecast of the Central Bank, which expects underlying inflation to reach 3.5% in the last quarter this year.  

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