growth surprises positively in July and August
economy is living up to high expectations, as growth continues to
accelerate. Following on 5.1% annual growth recorded in the second
quarter, the economy expanded 4.5% in July and 7.4% in August over the
same months the prior year, according to the monthly indicator for
economic activity (IMACEC, Indicador Mensual de Actividad Económica).
While the July reading came in just a notch ahead of market expectations,
the August reading well exceeded last month’s Consensus Forecast of 5.6%
higher growth trend
While the annual growth rate registered in July stayed below the second
quarter reading, seasonally adjusted data highlight the resilience
underlying the current economic growth trend. According to
seasonally adjusted data, the economy expanded by 1.45% over the preceding
month, contrasting the 0.45% monthly contraction in June. The July
figure represented the fastest pace observed since February 2003.
The annual growth rate in August was inflated by two extra working days
compared to August last year. Nevertheless, even in seasonally
adjusted terms the economy advanced 0.50% over the preceding month.
As a result of the strong growth observed in the first two months of the
third quarter, the annual average growth rate advanced from 4.1% in June
to 4.5% in August, the seventh consecutive increase.
sector remains key driver
The external sector remains the key driver behind the robust growth
experienced by the economy. In July and August, exports expanded by
52.1% and 64.9% respectively, driven by strong demand and higher prices
for copper, which accounts for half of total exports . As with oil
and steel, the economic boom in China has also rekindled demand for copper
in Asia as a whole. As a result, exports to the booming Asian
economies increased 64.1% in the first half of the year over the same
period last year. In combination with surging copper prices – up
63.0% in July/August over the same period last year – exports of the
metal almost doubled in the July/August period (+96.4% yoy).
Chile’s industrial sector is also benefiting from buoyant global demand.
In August, industrial output expanded 9.0% over the same month last year (using
the new index with 2002 as a base year, which leads to higher growth rates).
This was well above last month’s expectations of 6.0% growth (still
based on the old index with 1989 as a base year) and the highest growth
rate observed since May 2000. The improvement over the already
resilient 7.6% growth recorded in July seized most sub- sectors of
industry but was most pronounced in durable consumer goods, which reverted
a 5.7% contraction to a 7.3% expansion.
continues to rise
The resilience in industrial production and the economy as a whole is
still not reflected in employment. In the moving quarter up to
August, unemployment reached 9.9%, up from 9.7% in the moving quarter up
to July. The 0.2 percentage point increase in the unemployment rate
over the preceding quarter can be explained by seasonal factors. However,
unemployment is also well above last year’s level, which confirms the
deteriorating trend observed in the recent months. In the second
quarter 2004, unemployment exceeded the rate observed in the same period
last year by 0.5 percentage points. On a positive note, the number
of new jobs increased from 23,640 in July to 73,170 in August. However,
the labour force increased at an even faster pace, as an increasing number
of people take advantage of improving economic conditions and start
looking for a job.