Third Quarter growth in line with expectations.  Despite weaker economic activity in September, the economy showed a healthy expansion in the third quarter this year.  According to the Central Bank, Gross Domestic Production (GDP) expanded by 5.8% compared to the third quarter last year.  The third quarter figure was somewhat below the pre-announced 6.0%, owing to downward revisions in the preliminary growth estimates for July and August, but precisely in line with the Consensus.  Even though third quarter growth was well below the expansion rate registered in the second quarter (+6.1% year-over-year), seasonally adjusted data indicate that economic growth actually accelerated over the first half of this year (+1.7% in Q3 over Q2).

Domestic demand growth drops significantly.  Growth of domestic demand slowed significantly to 6.3% year-over-year compared to 12.0% registered in the second quarter.  The slowdown was prompted by much lower consumption owing to a higher comparison base in 1999.  Investment, on the other hand, improved markedly and registered growth for the first time since end 1998, expanding 7.7% over the same quarter last year.

Fishing and electricity lead growth.  On a sectoral basis, growth was led by fishing, which added 23.8% over Q3 1999, pushed by strong external demand for Chile’s fish farm products, but also favoured by a slump in the same quarter last year.  Agriculture expanded by 8.7% annually.  Electricity, gas and water also exhibited strong growth (+20.7% year-over-year) as the mostly hydroelectric power plants benefitted from abundant water supply, compared to last year when draught induced substantial shortages.  This effect, however, which has provided the basis for abundant growth rates in electricity output in 2000, should wane in the fourth quarter and growth rates should come down to levels in line with electricity demand growth.  Growth of industrial manufacturing slowed to 3.0% from 8.1% and 5.9% registered in the first and second quarter respectively.  The slower growth in manufacturing activity can be attributed to lesser dynamism of products manufactured for the domestic market (+1.7% yoy).  Growth in products fabricated for exports, on the other hand, proved more buoyant (+7.8% yoy), propelled by strong demand for processed seafood and fruits.  Commerce, restaurant and hotel activities picked up the pace, increasing by 5.6% over Q3 1999, as supermarket, automobile as well as durable and capital goods sales improved markedly.  Transport and communications remained the most dynamic services sub-sector, adding 11.6% over the third quarter last year, but grew at a lesser pace than the 11.9% registered in the second quarter.  While communications and freight transport remained dynamic, passenger flight traffic only showed a moderate development.

Industrial production strong and unemployment drops.  Meanwhile, more recent data provide a first gauge of fourth quarter performance.  In October, industrial production increased by 5.2%, significantly up from the 0.7% contraction in September and also above market expectations.  As investment recovers, capital goods production, which had been contracting since February this year, is on the rebound, adding 6.3% over October last year.  The recovery is corroborated by healthy capital goods imports and capital goods sales.  Capital goods sales showed positive growth for the third consecutive month and added 33.6% over the same month last year.  Only growth in durable consumer goods production continued to slow and remained far behind the strong expansion experienced earlier in the year. 

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