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Record
trade surplus amid high copper prices and increased volume
The strong copper prices have also left their mark in the country’s
external accounts. In March, the trade balance reached a surplus of
US$ 1.1 billion, the highest surplus ever recorded. The record trade
surplus is the result of mushrooming exports, amid healthy demand for
Chilean products and significantly higher commodity prices. The
price for copper, Chile’s main commodity, which in March accounted for
almost half of total exports, was 81.4% above the level registered in
March 2003. In combination with higher export volumes, particularly
to China, which is becoming an increasingly important trade partner for
Chile, copper exports almost tripled over March 2003 and thus accounted
for the lion share of the export boost. In addition, industrial
exports rose notably over the same month last year (+23.4% year-on-year).
Imports also increased sharply (+36.8% yoy), spurned by higher oil prices
and increased shipments of intermediate goods needed as input for the
booming export industry. Oil imports increased 83.3% over March 2003
and thus accounted for more than one fifth of the total import increase.
Other intermediate goods, which accounted for more than 40% of total
imports, added 42.3% over March last year. Capital goods constituted
the slowest growing category but still added 15.8%. Owing to the
strong trade surplus in March, the annual trade surplus increased from US$
3.6 billion to US$ 4.3 billion, which has prompted Consensus Forecast
panellists to revise their trade balance forecast sharply upwards from US$
4.1 billion expected last month to the current US$ 4.9 billion.
Chile
remains in deflation but likely to ease out soon amid domestic demand
pickup
Chile is remains in deflationary territory. In April, consumer
prices increased 0.37%, which was well above market expectations of 0.23%
but fell short of the 0.42% increase observed in March. With the
exception of food prices, which declined slightly in April, all categories
surveyed by the National Statistical Institute (INE) showed higher prices.
However, the price movements in most categories were moderate. Only
transportation costs experienced a notable upward shift and thus accounted
for the lion share of the April price increase. As a result of the
April price spike, the annual rate of consumer price variation, which was
negative in March for the first time since the 1930s, picked up from -0.7%
to -0.3%. Prices thus seem to be developing according to the Central
Bank’s expectations, which see monthly price movements returning to
normal in the next months amid the pick up in domestic demand.
However, giving the 'all-clear' signal would be premature. In April,
the core inflation index, which excludes volatile categories, such as
fuels as well as fresh fruits and vegetables, increased only 0.24%, which
took the annual rate to below zero for the first time since the index has
been calculated. The Central Bank acknowledged that core inflation
was currently below its expectations but confirmed that officials
nevertheless see inflation reaching the central target of 3.0% within the
usual policy horizon of 24 months. In order to achieve this
objective the Central Bank is likely to maintain its accommodative
monetary policy stance and should abstain from raising its policy rate -
currently at 1.75% - in the near future. Consensus Forecast
panellists share the assessment of the Central Bank and see inflation
rising to 2.0% by the end of the year and to 2.8% by the end of 2005. |
