|
First
quarter GDP comes in ahead of expectations
In the first
quarter, gross domestic product (GDP) increased by 4.8% over the same
quarter last year. The final figure slightly exceeded the growth
reading reported last month based on preliminary figures, which had
implied a 4.6% expansion in the first quarter. The first quarter
growth was well ahead of the 3.3% annual growth registered in the fourth
quarter 2003 and thus confirmed the anticipated quickening trend reflected
in the LatinFocus Consensus Forecast. Moreover, seasonally adjusted
data corroborate the acceleration at the beginning of the year.
Compared to the previous quarter, the economy advanced 1.6%, the fastest
pace since the end of 2000.
External
sector propels economy while domestic demand slows slightly
In the first quarter, the economy developed broadly along the lines
observed in the final quarter of last year. The already strong net
contribution from the external sector increased somewhat, whereas domestic
demand decelerated compared to the fourth quarter. Growth in
domestic demand slowed from a 5.5% pace in the fourth quarter 2003 to a
still robust 5.2% in the first quarter. In the first quarter,
consumption and inventories the Central Bank only publishes joint data
for the quarter increased 4.9% over the same period last year,
compared to the stronger 5.6% expansion observed in the preceding quarter.
Gross fixed investment, on the other hand, expanded 6.3%, a notable
improvement compared to the 5.5% growth observed in the fourth quarter.
The improvement was due to a further pickup in investment in machinery and
equipment, whereas investment in construction and other works slowed
slightly. The net contribution from the external sector improved
markedly as growth in exports accelerated from 6.3% in the fourth quarter
to 10.1% in the first quarter and growth in imports, which are a
subtraction in the calculation of GDP, receded from 13.9% to 12.4%.
Manufacturing
sector main driver behind acceleration
On a sectoral basis, manufacturing constituted the main driver behind the
accelerated growth observed in the first quarter. Industrial
manufacturing, the most important sector of the economy, more than tripled
its pace from a lacklustre 2.0% in the final quarter to 6.4% in the first
quarter. According to the Central Bank, the sector profited from a
pickup in external demand for Chilean manufactures, amid the rebound in
global demand. In addition, manufacturing profited from a
substantial swing in the fishing industry which reverted a 16.8%
contraction in the fourth quarter to a 32.1% expansion in the first
quarter, in the wake of increased maritime fishing and robust growth of
activity in fish farms. Next to a positive development in the
agricultural sector growth jumped from 1.7% in Q4 to 6.2% in Q1
the higher fishing manufacturing industry could thus increase output,
which was met by increased demand for Chilean manufactures.
Mining
industry slumps amid temporary technical problems
Other major sectors continued to grow along the lines observed in the
fourth quarter, with the exception of mining. Mining was the only
sector to experience a contraction in the first quarter this year.
While very moderate mining dropped 0.2% over the same period last year
the decline was surprising given the rapidly increasing international
demand for copper, which accounts for the lion share of the Chilean mining
industry. According to the Central Bank, the decline from the 3.7%
growth in the fourth quarter reflects transitory technical glitches in
some large-scale mining companies, which suggests that the sector will be
back on track in the second quarter.
Economic
growth slows in April and
In April, the Chilean economy could not uphold the strong pace observed in
March but the outlook for the second quarter nevertheless remains robust.
In April, industrial production increased 4.9% over the same month last
year, well below the resilient 7.8% pace observed in March. The
deterioration over March was due to a massive swing in capital goods
output, which dropped from a 13.2% expansion in March to an 8.9%
contraction in April. In addition, growth in intermediate consumer
goods, which account for the lion share of industrial production, dropped
from 10.5% in March to 4.7% in April and thus offset the stronger durable
and non-durable consumer goods growth.
unemployment rises unexpectedly
Unemployment
data continued to surprise on the downside. In the moving quarter up
to April, unemployment rose to 8.7% from 8.1% in March. In part, the
increase follows a seasonal pattern, which typically has unemployment
rising in the first months of the year. However, when compared to
the same period last year, the unemployment rate increased by 0.2
percentage points, which was notably worse than the 0.1 percentage point
improvement observed between March last year and March 2004. In fact,
April constituted the first month with a year-on-year increase in
unemployment since June 2001. The reason behind the increase in the
unemployment rate is the declining number of new jobs created in the
current upswing. While the Chilean economy continues to add new jobs,
the number dropped sharply in March and April and was thus insufficient to
absorb the number of new job seekers resulting from the increase in
population.
Oulook
remains robust as external sector benefits from increasing global demand
Consensus
Forecast panellists expect that the Chilean economy will maintain the pace
observed in the first quarter and anticipate the economy to expand by 4.9%
in the second quarter. Moreover, economic growth should remain
robust in the second half of the year, resulting in 4.8% expansion for the
full year, as healthy global demand and favourable commodity prices keep
the growth engine going. In 2005, the economy is anticipated to grow
even a notch faster at 4.9%.
|
